legal advice | She Owns It

What Do Entrepreneurs Gain From Incorporating A Business? by @DeborahSweeney

March 26, 2019 by Deborah Sweeney Leave a Comment

by Deborah Sweeney | Featured Contributor

Should you incorporate your business? Is it really necessary to incorporate if you want to run a business? As the leader of a business that specializes in document filing services, I hear the first question asked quite a bit by new and existing entrepreneurs alike. My answer is always a resounding ‘Yes!’ — and not just because it’s what I specialize in doing, either.

The second question is a little trickier to answer. In theory, you don’t have to incorporate a small business. Some entrepreneurs have side hustles that they choose not to incorporate. The reasons for this may vary. The gig, for instance, could be a side project you’re passionate about, but don’t make much money from or have a desire to expand into working on full-time. Another reason could be the incorporation process itself. This is often viewed as too time-consuming and boring to do… so entrepreneurs avoid doing it. However, entrepreneurs may not realize just how many benefits they’re missing out on simply because they chose not to incorporate.

Should you incorporate a business? Yes! Is it really necessary to incorporate? Also, yes! Let’s talk about all the great things you (and your business) gains from getting started.

Liability Protection

If you decide to form a limited liability company (LLC) or corporation for your business, these entities ensure that it receives liability protection.

What does this term mean, exactly? Liability protection maintains a separation between your professional and personal assets. If your business was delinquent on its debt, liability protection would ensure that personal assets, like houses and cars, were not impacted outside of the business.

Are there any entities that do not provide liability protection? The most prominent one is a sole proprietor. Many entrepreneurs incorporate under this entity due to its affordability. Acting as a sole proprietor also ensures that you, the business owner, are in control of the business. This kind of responsibility, however, means that any and everything that can happen — from accidents to product damages — holds you fully accountable. If the thought of unforeseen circumstances keeps you up at night, you may consider switching entities for liability protection.

Building Credibility

How do you feel after you’ve done business with a company that had an “Inc.” or “Corp.” in its name? There’s a bit of added trust that comes with shopping or investing with these types of businesses. Incorporating gives businesses an added boost credibility. This legitimizes the business, making it a win-win for both the company’s reputation and the trust customers are able to quickly establish with it.

Understanding The Structure Of Your Business

It’s not uncommon for an entrepreneur starting a business to ask themselves what type of business they want to own and operate. They have a pretty good idea of what their offerings will be and their given industry. What about the company’s legal structure?

Incorporating does more than provide liability protection, potential tax savings, and establish credibility for a small business. It also provides them with an entity that helps structure the company.

Let’s take a moment to compare and contrast what it means to incorporate as an LLC versus a corporation. An LLC provides a bit of added flexibility in its legal structure, such as the ability to choose an S Corporation as its tax entity. Forming an LLC is also ideal for small businesses that wish to stay small and independent. In the event that you choose to expand and would like to take the business public, you do not need to remain an LLC forever. You may change the entity to a public legal structure like a C Corporation when the time is right.

Corporations, on the other hand, are much more strict legal structures. Entrepreneurs that choose to incorporate as a corporation usually have big plans for their business, like raising capital, going public with an IPO, and expanding worldwide. A corporation would be the ideal entity for this kind of business structure. It allows entrepreneurs to accept money from investors, issue stock, and still keep the company protected through liability protection.

Incorporating Is Just The First Step!

Understanding the entity you want, and need, before incorporating your business ultimately provides it with a great foundation for success.

Don’t forget that you’ll need to check a few legal items off your to-do list after incorporating, too! Apply for basic business licenses that pertain to your company and its offerings, business insurance, an employer identification number (EIN), and any trademarks or copyrights necessary to protect your intellectual property.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

As CEO of MyCorporation Business Services, Inc., Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With her experience in the fields of corporate and intellectual property law, Deborah has evolved from lawyer to business owner. She has extensive experience in the start-up and entrepreneurial industry as she has been involved in the formation of hundreds of thousands of businesses for MyCorporation.com’s customers.

Ms. Sweeney received her JD & MBA degrees from Pepperdine University. She is active in the community and loves working with students and aspiring entrepreneurs. She serves on the Board of Regents at California Lutheran University and is a founding member of Partners of Pepperdine. Deborah has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in the areas of corporate and intellectual property law. Ms. Sweeney is also well-recognized for her written work online as a contributing writer with top business and entrepreneurial blogging sites. She is a regular contributor on Forbes, American Express, Social Media Today, and BlogHer among many others.

In her ‘free’ time, Deborah enjoys spending time with her husband and two sons, Benjamin (8) and Christopher (6). Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Follow her on Twitter @deborahsweeney and @mycorporation.

Deborah Sweeney

www.mycorporation.com

Should Entrepreneurs Act As Their Own Registered Agent? by @DeborahSweeney

May 16, 2018 by Deborah Sweeney Leave a Comment

Should Entrepreneurs Act As Their Own Registered Agent?

by Deborah Sweeney | Featured Contributor

“To act as your own registered agent or to work with a third party? That is the question.” We might have paraphrased this famous quote from William Shakespeare to fit into the present day, but we have a feeling the Bard might have shared similar musings if he had been an entrepreneur.

For those that don’t know what a registered agent (commonly referred to as an RA) does, this is an individual or a company that is designated by an LLC or corporation to accept official documents on behalf of a small business. While many small business owners choose to work alongside a third party, some decide to act as their own registered agent. This is still legally acceptable, so long as you thoroughly understand what is expected of you in this role. Here’s a look at some of the responsibilities that come with acting as your own RA.

A physical address is required.

As a registered agent, you must have a physical street address. A P.O. Box is not considered to be an acceptable address. Furthermore, the street address must be in the same state you do business and the RA must also be a resident of the state. If your LLC or corporation has been formed outside of your home state, you may need to work with an outside registered agent service until (and if) you decide to move the business to that state and work from a physical address within that location.

You must be available during general business hours.

Corporations and LLCs that are formed on a state level must have a designated registered agent in order to accept correspondence on behalf of a business and remain complaint with the state law. Correspondence tends to arrive during general business hours and registered agents must be available at that time to accept service of process. This can prove to be difficult for ‘treps on the go, who may not be available or physically present at their designated address during normal operating hours.

Are you ready to receive this much paperwork?

Registered agents accept quite a few legal documents on behalf of a small business which may include franchise tax forms, annual reports, renewal reminders, and lawsuit paperwork. They also accept official documents from the state. If you don’t mind staying organized with all of this paperwork, then you may be able to be your own RA. However, if you’re concerned that some of the documents might get lost along the way or disorganized you may find it’s a better idea to work with a registered agent service.

I don’t think I have the bandwidth to be my own RA! What should I do?

Reach out to a third party registered agents and work alongside them! You’ll find that it provides peace of mind to work with knowledgeable and reliable professionals that know exactly what they’re doing and are often more affordable than hiring a CPA or attorney. If you need help finding one, visit your state’s Secretary of State website for a list of active registered agents.

Deborah Sweeney

www.mycorporation.com

How to Choose an Attorney for Your Business by @deborahsweeney

July 24, 2014 by Deborah Sweeney 2 Comments

Photo Credit: The Sean & Lauren Spectacular via Compfight cc

by Deborah Sweeney | Featured Contributor

Finding a lawyer can be pretty intimidating for anyone that runs a small business. Before I bought my company MyCorporation, I actually worked as an attorney specializing in intellectual property law, so I know what it feels like to be on both sides of the desk. Because of my past experience as a lawyer, a lot of entrepreneurs ask me for advice on finding an attorney of their own. And the process isn’t as complicated or drawn out as you’d think either – you just have to know how, and where, to look.

Remember that not all lawyers are created equal.

I don’t mean that some lawyers are good and some lawyers are bad. Though that one is true – if you’re meeting with an attorney whose office is a mall kiosk, look elsewhere. Lawyers and law firms come in all shapes and sizes. If you’re a small business, you probably want to work with a smaller, local firm that is willing to meet with you one-on-one. Different lawyers also have different specializations, so make sure whomever you choose can help you with what you need. A tax and licensing attorney, for example, would much more useful in helping you map out tax liabilities and gains than an intellectual property attorney.

Know what you can afford.

Attorneys are not cheap – according to the Laffey Matrix, an attorney fresh out of law school charges on average $320. Larger firms can typically handle all of your issues in-house since there are multiple attorneys in the office, but you’ll also pay for convenience. An attorney from a smaller firm may be more affordable, but might not be able to meet all your needs. It’s all about cost-benefit so be sure to set a budget ahead of time and know what you can and can’t afford for representation for your business.

Ask for references.

The network of small business owners you’re connected to has probably consulted with an attorney at one point or another so ask them who they’ve used, or if they know of anyone in the area who does good work. If your peers fail you, move on to friends and family. One of the biggest hurdles in looking for an attorney is finding someone you trust and connect with and reliable references matter here. Only ask people you trust for references, and use them to narrow down your list.

Make a list and schedule consultations.

While there are some attorneys that fit the stereotype of being snarky and underhanded to a T, most lawyers are genuinely honest people. You just need to make sure you find one from the latter group, rather than the former. Make a list of possible attorneys in your area based on price, references, and specializations and meet with them. You want to hire someone who you feel comfortable with, and with whom you can communicate easily too.

Reflect post-interview.

Treat these consultations like you would an interview with anyone else you were considering hiring. Jot down a few notes and reflect on the interview. Did you mesh well with them? Could you see yourself maintaining a solid, working relationship with that person? Do they seem genuinely interested in helping you and would their past experience make them an asset to your business? Remember that hiring an attorney is a serious investment, so you need to be absolutely sure you choose the best lawyer for you. Do your research and trust your instincts, and you’ll be able to find someone you can trust to help protect your business.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

As CEO of MyCorporation Business Services, Inc. (MyCorporation.com), Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With her experience in the fields of corporate and intellectual property law, Deborah has evolved from lawyer to business owner. She has extensive experience in the start-up and entrepreneurial industry as she has been involved in the formation of hundreds of thousands of businesses for MyCorporation.com’s customers.

Deborah Sweeney

www.mycorporation.com

How to Create a Privacy Policy for Your Website

June 19, 2014 by Deborah Sweeney 1 Comment

Photo Credit: ZERGE_VIOLATOR via Compfight cc

by Deborah Sweeney | Featured Contributor

Most websites collect information on their visitors to help target markets, track trends, and create effective advertising. It’s still up to the business to protect any information it stores, and to be open and honest with what it does with that information. If you’re running a small business, this is why you need a privacy policy in place.

A privacy policy is a publicly posted notice that covers what information you collect and how you use it. There are currently no federal laws that force every business to post a policy, but many states do require one, and they’re useful in protecting your business from lawsuits. Luckily privacy policies aren’t that hard to create – just make sure that whatever you write includes the following elements.

1) What you’re collecting.

My company’s website collects most of its information through contact forms. Our customers want to know about something, so they fill out a form, give us some of their personal information, and we get in touch. It might sound obvious enough what kind of information we’re collecting, but we plainly and clearly lay out that we are saving that data and that we will use it to contact you. At any point, if you ask your customers for an email address, a name, or a phone number, or if you collect cookies, make sure you mention that you save that information in your privacy policy.

2) Who you’re sharing with.

Most sites refuse to share or sell information collected on their customers, and that’s probably the best practice. If you do share information for promos, you must make that clear in your privacy policy. Your users have a right to know what you’ll do with their information when they give it to you, so they can make an informed decision as to whether or not it’s worth using your site.

3) What you do with it.

Normally, information on web traffic is collected for two reasons – to contact users and to figure out where your web traffic is coming from. Make sure you lay out why your site saves this kind of information. The only way you can really collect personal information is if your users give it to you, so just say that any contact forms that are filled out could be used to contact the user in the future. Cookies are also useful for following web traffic. If the customer doesn’t disclose any personal information on the site, the cookie isn’t going to reveal anything new. But a cookie can be used to track how people got to the site, and what page they are on. That kind of information works to help businesses target their advertising, so if you collect cookies for that purpose, be sure to say so.

4) How you protect information.

You don’t have to cover every individual security protocol you use to protect customer information, but you should assure them that their information is secure. Chances are that your site already has policies in place to protect sensitive information. Give a brief overview of what those policies are, and if you are held to any third-party standards. Again, this shouldn’t be overly technical, but it should affirm your business’s dedication to user privacy.

5) Write for your industry.

Why would an accountant want to use a policy that could also apply to a retailer? You should write your own privacy policy and tailor it for your business’s unique circumstances. Some industries, like healthcare or finance, have special regulations they have to contend with, and if that’s the case, incorporate those regulations into your policy.

6) Write in plain English.

Online privacy and security are two important subjects people are understandably passionate about. It is generally accepted that browsing information will be collected, but there is already an air of suspicion around the businesses and organizations that collect it. If you write a privacy policy that is muddled or full of jargon, your users are going to be upset. Write as plainly and clearly as you can. If your customers understand your privacy policy, they’ll be more likely to accept the terms it proposes. As with most business matters, openness and honesty are the best policies.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney

www.mycorporation.com

What to Put Into Your Corporate Maintenance Plan by @DeborahSweeney

October 8, 2013 by Deborah Sweeney Leave a Comment

by Deborah Sweeney, CEO of MyCorporation.com | Featured Contributor

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 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.

Deborah Sweeney

www.mycorporation.com

How to Keep Your Business Compliant by @DeborahSweeney

August 5, 2013 by Deborah Sweeney Leave a Comment

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 16^th. 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 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.

Deborah Sweeney