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What to Put Into Your Corporate Maintenance Plan by @DeborahSweeney

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by Deborah Sweeney, CEO of MyCorporation.com | Featured ContributorBeautiful Woman with Pencil and Folder Isolated on White.

A few months ago I wrote an article for SheOwnsIt on keeping your business in compliance, which had some broad advice on how to ensure your business stays in good standing with the state. At the end I briefly touched on respecting corporate formalities, but I didn’t include very much detail as to what can be done to make sure your corporation doesn’t fall out of compliance. Having a corporate maintenance plan is more of a recommendation than a requirement, but if adopted and stuck to it can save you loads of stress and even some money. When planning out your corporate calendar, be sure to include the following three items.

Shareholder Meetings

Corporations are required to have, at the very least, one shareholder meeting every year, during which different agenda items are voted on and the shareholders have a chance to catch up on the latest news with the business. These meetings don’t have to be boring get-togethers in a stuffy airport Hilton conference room – shareholder meetings can be held over casual appetizers and drinks, if you’d like them to be. Just keep in mind that corporate directors have to inform shareholders of the date, time, and place of the meeting, and minutes have to be taken. Plan these meetings as far in advance as you can, and then send a reminder as the date closes in. It’s also not a bad idea to start planning from the start either. At the beginning of the year, find a good time to schedule the shareholder’s annual meeting so it doesn’t sneak up on you later on and you don’t have to rush to throw something together.

Internal Records

Another important part of your corporate plan will be setting out how you will maintain internal records. Along with keeping the minutes for the shareholder’s meeting, you will need to keep minutes for any meeting in which the directors or executives make decisions for the business. However, minutes should remain light – there is no reason to write every single detail down. Create a template that has spaces to detail when and where the meeting was, how many people attended, the agenda items, and a breakdown of the votes. You can amend the minutes before making them official, but remember that what you put down has to be an accurate record of what happened – otherwise you could find yourself in hot water.

Reports and Renewals

Finally, write down all of the important dates and deadlines your business has coming up – when your annual report has to be filed by, when renewals have to be sent, when you have to pay your registered agent, etc. The easiest way to fall out of good standing is by missing one of these dates, and while your registered agent should tell you when these deadlines are approaching, you don’t want to depend on them entirely. Highlight these dates in your maintenance plan, and don’t leave them for the last minute.

Corporate maintenance requires a bit of extra work, but you can make it easier by planning everything out early in the year. The whole reason for writing a corporate maintenance agenda is to keep you from scrambling at the last minute and possibly missing an important date for your company. By adhering to corporate governance requirements by holding meetings, diligently recording minutes, and sending in the reports and fees required by the state, you’ll never have to worry about falling out of good standing, and won’t be hit with non-compliance fees. In my opinion, that peace of mind is well worth the few days it takes to set up your corporate maintenance plan.

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About the Author:

Deborah Sweeney HeadshotDeborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.

What to Do Next When Your 5-Year Business Plan Comes to a Close by @DeborahSweeney

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by Deborah Sweeney, CEO of MyCorporation.com

Writing a 5-year plan is usually the very first step in the occasionally stressful but always rewarding road of business ownership. One of the biggest problems with most 5-year plans is that you are sort of flying by the seat of your pants when you write it out. Until you actually run a business, you have no idea what type of obstacles you’ll face, or even what you can achieve. A 5-year plan is often based on cursory research, some hope, and a bit of guesswork. At the end of your first five years, you should look back on your original plan to see how far you’ve come, then figure out what you need to work on for the next 5 years to come by doing the following five things:

1. Identify new goals.

After the first five years, the rate of failure for small businesses decreases dramatically. If you’ve made it past the five year mark, your business has shown that it can be profitable, which was likely one of your main goals. But what were your other ones? Did you set out to increase your market by a certain percent? Did you want to pay back a good chunk of your business loan? Check off whatever goals you met, and focus on the goals you didn’t meet, or want to build on. Doing this may seem a bit obvious, but actually looking at a hard copy of your goals is an excellent way to help focus your company and define your growth strategy.

2. Reevaluate what’s working and what isn’t.

When you run a successful business you can sometimes get stuck in a ‘if it isn’t broken, don’t fix it’ mindset. It can be a bit unnerving to fiddle around with the inner workings of the company if, thus far, all of the elements seem to be aligning and working well enough together. But if you refuse to fix or ignore a problem in the business, that problem will rear its head and could be a lot more destructive. If you feel like something isn’t working, be it marketing, accounting, employee relations, or stocking methods, now would be a good time to fix that problem.

3. Take a look at your competition.

Your market and industry has probably changed quite a bit over the past five years. Competing businesses have fallen, and new ones have popped up to take their place. Take a look at the industry and your competitors to see what everyone is up to. Doing so will help you to continue to stand out from the crowd, and could also reveal new ways to remain competitive within the industry.

4. Make sure your finances and paperwork are in order.

After five years, you’ll probably have an excellent accounting system in place, but it never hurts to perform a sort of self-audit and see exactly where you stand financially. The five-year mark is also a good time to make sure any state paperwork that needs to be renewed has been – some states, for example, require businesses to renew their trade name (DBA) every five years. If you’re still chugging along with the default sole-proprietorship structure, think about forming a separate entity for your business so you can protect your personal assets and allow your business to carry its own debt.

5. Grow!

Stagnation is your business’s enemy, so never stop fighting it and always try to grow in some way. Growth goals can be as simple as making more money or finding more customers, but they can also be a bit more abstract, like introducing a new marketing strategy or learning more about entrepreneurship. As long as you are always aiming for bigger and better, neither you nor your company will stagnate.

Making it past the five year mark is a real accomplishment, but it is too easy to start resting on your laurels and assuming your success will continue without any further effort. You are always going to face challenges as a business owner, though those challenges may change from the ones you dealt with when you first started. Use that old five year plan to figure out what you’ve done well and what needs work, and then try to improve on both. And don’t forget to enjoy your success – you’ve earned it!

Photo Credit: ‘SeraphimC via Compfight cc

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About the Author:

Deborah SweeneyDeborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.

How to Keep Your Business Compliant by @DeborahSweeney

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by Deborah Sweeney, CEO of MyCorporation.com

I cannot begin to stress how important it is to make sure your business stays compliant with the state. Small business owners have a tendency to procrastinate when it comes to filing important paperwork and paying state fees, but if your business falls out of good standing with the state you will have to pay, both monetarily and with your time, to get your company compliant again. It’s a much, better idea to instead just buckle down and stay on top of everything, especially these three required areas.

Your Estimated Tax Payments

You really don’t want to test the boundaries of government oversight when it comes to taxes and the IRS. Anyone who is self-employed and expects to owe more than $1,000 when they file their return has make quarterly estimated tax payments. If your business is a corporation and you expect to owe more than $500, you also have to make estimated tax payments. The IRS does provide instructions on how to determine estimated tax, and when payments are due – as a quick heads up, the next due date for 2013 is September 16th. For individuals, these instructions are part of the 1040-ES package, and for corporations the instructions are part of the 1120-W. Now, it is okay if your calculations are slightly off, but if you’re grossly underpaid you will be hit by some steep fines. Paying estimated taxes can feel a bit like trying to predict the future, so most accountants recommend you pay at least 100% of the taxes you paid last year. If you are really worried, re-estimate in the middle of the year (August is a good month to do this during) and see how close your estimates were to what you actually owed during the first two quarters.

Your Annual Reports

If you run your business as a sole-proprietorship, you don’t have to worry about annual reports – though we do recommend reconsidering your business structure. But, if your business is structured as an LLC or a corporation, most states will require you to file a report on your business and pay a fee every year. This report is meant to ensure that the information filed with the state, like who your registered agent is and where your business is located, is up to date. Not filing an annual report is one of the quickest ways to fall out of good standing, so make sure you always mark your calendar with when you need to file.

Respect Corporate Formalities

Neither sole-proprietorships nor LLCs have to worry about adhering to corporate formalities, though most business advisors suggest that LLCs should still hold annual meetings, adopt an operating agreement, and document any business decisions and financial activity for the sake of legal protection. Corporations, on the other hand, are required to adhere to strict, formalized operating procedures. When you form a corporation, you must hold an initial meeting for the directors to adopt bylaws, elect officers, and issue stock. After that, you have to have annual meetings for the directors and the shareholders, and keep the minutes for these meetings in your records. Business and financial activity must also be documented, and nearly any change to the business has to be adopted through corporate resolutions. It is easy to fall behind on the many formal requirements that corporations have to adhere to, but if the state looks into your records and sees you aren’t following the rules, they can revoke your status as a corporation. So keep detailed records and respect state requirements.

Staying compliant with the state can be a very time-consuming, arduous process, but it is something that every small business needs to do. Make sure you know exactly what deadlines you have to file by, how much money you have to send along, and what hoops you have to jump through to stay compliant. The last thing you want is to have to pay exorbitant fees and file a bunch of paperwork to get back into good standing, and putting in a little effort now will save you from having to worry and stress about your business’s standing later on.

Photo Credit: ♥beryl via Compfight cc

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About the Author:

Deborah Sweeney HeadshotDeborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.

Should I Incorporate or Form an LLC in Another State? by @DeborahSweeney

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By: Deborah Sweeney, CEO of MyCorporation.com

New business owners often ask me that question and, unfortunately, it cannot be answered with a simple yes or no. It begins when business owners hear about lower taxes and fees in other states and start to wonder if they can take advantage of that business-friendly atmosphere, even though they don’t technically do business in that state. Forming an LLC or incorporating turns a business into its own legal entity, separate from you, and it can be formed anywhere within the United States. But it isn’t simply a matter of paying Nevada to incorporate within their state, and then continuing to do business in California while only paying Nevada taxes and fees. Before you decide to form a business entity in another state, consider the following three points.

Choosing another state isn’t a good option for some types of business

If you run a traditional brick-and-mortar business – something like a local bookstore, or a restaurant, or a computer repair company – forming a business in another state isn’t a very good idea. Locally-based businesses already have to contend with local regulations and fees, and forming a business in a state other than the one you do business in complicates matters further. Even if you are able to save a little bit of money on taxes, the extra headache associated with all of the regulations placed on foreign businesses by the state they are operating in may not be worth the hassle.

Sometimes, you cannot avoid the taxman

The state treasury is going to try anything it can to get the money it feels it deserves, and sometimes creating a business in a more tax-friendly state isn’t enough to help you avoid having to send in a chunk of your profits to the state you do business in. California, for example, has laws on the books that enforce its taxes and regulations over those of the state of formation if the majority of a business’s transactions take place in California. If the state you do business in has similar laws, and some do, you will still have to pay corporate income tax, even if your state of formation doesn’t collect one. This isn’t the case for every state, but most states do charge a franchise tax to any entity operating within their borders. If you run a multi-state business, this is just the cost of inter-state commerce, but if you are just trying to avoid having to pay a lot in taxes, unfortunately forming your business in another state may not be the answer to your problems.

There will be other fees and regulations

On top of the taxes that some states force foreign corporations and LLCs to pay, more often than not a foreign business entity will have to pay extra for permission to operate within the state they do business in. It is also more expensive to file annual reports and other renewals, and you will have to have a registered agent in both the state the business was formed in and the state you do business in. All of this can add up, so unless your company was going to do business in multiple states anyway, the cost of being a foreign corporation could be prohibitive.

There are some good reasons for choosing to incorporate or form an LLC in another state. Some states, like Nevada or Delaware, have regulations that are easier to comply with and lower tax rates. If you’re going to run a multi-state entity, choosing a business friendly state as your home base is understandable. But if you are a small business owner trying to save money, it doesn’t make much fiscal sense to go through the effort of forming a company in another state and then qualifying as a foreign corporation or LLC in your home state. In fact, it may be more expensive to go that route. Contrary to what some business analysts may have you believe, forming your business in another state is not a silver bullet for your tax woes. So talk to an accountant, a business attorney, or an experienced third party before forming a business outside of your home state to make sure that is a wise path to follow. It may not be.

Photo Credit: nerdmeister® via Compfight cc

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Author Bio:

Deborah Sweeney HeadshotDeborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.

Why Are LLCs So Popular? by @DeborahSweeney

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By: Deborah Sweeney, CEO of MyCorporation.com

Back in 2010, Assistant Professor of Law Rodney D. Chrisman published ‘LLCs are the New King of the Hill,’ a groundbreaking study on the popularity and growth of the limited liability company, in the Fordham Journal of Corporate and Financial Law. The LLC structure is relatively novel in the world of business law and, as is pointed in the article, was a bit obscure in the nineties. However, Professor Chrisman’s research showed that, by 2007, LLCs were being formed at a much faster rate than any other business structure, outpacing corporations by a margin of nearly two-to-one. What fueled this meteoric rise? And why, of the various business structures available, are limited liability companies preferred by so many new businesses?

Protection

Many small businesses start out as sole proprietorships or, in some cases, partnerships. Once you file for a doing business as name, an EIN, and all of necessary licenses and permits, you’re pretty much ready to do business. The trouble is the business is then inextricably tied to you, or you and your partner if you have one. You are the business, and though you may be selling services or products under a different name, the business, its debts, its profits, and its liabilities are all yours. Traditionally, you would separate the business from yourself by forming a corporation. This turned the business into its own legal entity, which you then helped run. The business held its own debts, was paid a wage, and was taxed separately. In return, the business owner was afforded some protection in case the company went under or was sued. The LLC structure was not widely recognized until the late 1980’s, but once states began adopting LLC-related legislation, many business owners saw a golden opportunity. Forming an LLC afforded the owner, or owners, legal and fiscal protection without being as complicated or as expensive as a corporation.

Taxes

Corporations often fall victim to ‘double taxation’ – most states have a corporate tax rate that is levied against a corporation’s profits, and then shareholders have to pay personal taxes on whatever income they derived from the corporation. There is, however, something called an S-Corporation, which allows for the flow of profits through the business directly to the shareholders, thus avoiding the corporate tax. Unfortunately, an S-Corporation requires that you form a C-Corporation first. They can also be difficult to maintain and are subject to a litany of laws and regulations. An LLC, on the other hand, has a pass-through structure by default – and if, for whatever reason, the members don’t like that structure, they can also choose a different way to be taxed.

Simplicity

As was mentioned above, running a limited liability company is much simpler than running a corporation. There are no annual shareholder or member meetings, unless an operating says otherwise, and some states even allow LLCs to be set up with only one member. Regulations vary from state to state, but for the most part all you need is a well-kept record of major business decisions and a spreadsheet laying out the company’s finances. Most states also require LLCs to send in an annual report with updated information on the names and addresses of an LLC’s members and to pay a fee. Compared to the records you have to maintain in order to properly run a corporation, an LLC is a much, much simpler structure.

Some states are still trying to fully grasp what an LLC is, and what kind of protection it affords its members. But, for the most part, the LLC has become an accepted, respected, regulated legal structure, and small businesses all across the United States have chosen to form an LLC to take full advantage of the protection it affords them. LLCs will, undoubtedly, continue to be one of the most popular business structures barring a serious reform of corporate law thanks to the structure’s simplicity, its ability to shield its members, and its tax structure.

Photo Credit: Cavan Images via Compfight cc

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About the Author:

Deborah Sweeney HeadshotDeborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.

Order Up: The 3 Best Legal Structures for Small Restaurants by @DeborahSweeney

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by Deborah Sweeney, CEO of MyCorporation.com

Ready to start up a restaurant or food truck this summer? Before you begin exploring empty lots and scouring the streets for high foot traffic areas in an attempt to find the perfect location for your new eatery, independently owned and small chain restaurants must look into what type of legal structure they should become. While there are several different options available, business owners can’t pick one at random and leave it at that. They have to research what legal structure is the best fit for the size of their business, whether or not the structure offers liability advantages and if there is flexibility when it comes to taxes.

Here are three business structures perfectly suited for individuals running the show solo, working alongside a partner and for those ready to open up a small multi-unit chain set of their very own.

1) Sole Proprietorship

You’re the boss but you’re also your own biggest gamble if you decide to set up a sole proprietorship; a legal structure that holds you completely liable for all of the company’s debts. Foodservicewarehouse.com sums sole proprietors up as a business entity that legally has no separate existence from its owner. The positives of working within a sole proprietorship include that of all of the structures, it’s the most affordable and easiest to establish and if you are prepared to take on a high amount of responsibility alone, you get to exercise complete control over the restaurant. But owner beware: with no tax or liability assistance on your side that those within partnerships or LLCs enjoy, if the restaurant is sued or has legal action taken against it, the owner is held completely responsible. Not enough money to pay off the debt accrued? You may wind up losing the restaurant and possibly other collateral in the process like your car or home.

2) Partnership

Pairing up with a family member or a friend to co-open a fun new eatery? The partnership is the ideal legal structure if two or more individuals decide to set up a restaurant together. Teamwork is a big plus in establishing a partnership’s corner as the partners within the structure are allowed to share profits and losses, which according to Starting a Restaurant’s Guide include hiring employees and borrowing money. Members of a partnership are also legally liable for their actions as well as the actions of their business partner’s. But you may also have more trouble with taxes and liability than one would have under a corporation.

3) Limited Liability Company (LLC)

Do you still want to open a chain of restaurants alone and are willing to put more money and time into it than chance the risk of being a sole proprietor? The Limited Liability Company (LLC) route is the best way to go. With characteristics of both a corporation and a partnership, LLCs offer flexibility by way of tax-treatment for the entity you decide to tax your profits as, the ability to split the profits made in any way you like, and also personal liability protection (this means not having to say goodbye to your house if things go awry). The money you put into the LLC is the only amount put at risk, unlike a sole proprietorship in which a lawsuit could take away your restaurant, legal action may not do the same under an LLC.

Unfortunately, while owners within LLCs are referred to as members, LLC structures may not be made public. Switching to a C-corporation later on is your best bet if your restaurant takes off. You may also consult an attorney and an accountant if you need additional legal and financial advice for the taxes, liability, and financing that fit into the goals of your restaurant.

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Author Bio:

Deborah Sweeney HeadshotDeborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.

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