Streetwise Incorporating Your Business: From Legal Issues to Tax Concerns, All You Need to Establish and Protect Your Business

by Michele Cagan CPA

Overview

Incorporating your business can provide numerous legal and financial advantages - it also has long-term ramifications on how you manage and structure your organization. Streetwise Incorporating Your Business will not only educate you about the benefits of incorporating your business, but will also help you determine which corporate form and structure will be the most advantageous for your personal circumstances.

You will learn the details of many critical business issues, including:

• Whether an S corporation or a C corporation is better for your organization
• Which state and federal regulations will affect your corporation
• How to avoid hidden costs associated with incorporating your business
• Tax planning strategies and required accounting practices

Streetwise Incorporating Your Business will lead you through each decision, from choosing the best location to incorporate, deciding which information to include in official government filings, and learning how to organize board and shareholders meetings.

Product Details

ISBN-13:	9781440516764
Publisher:	Adams Media
Publication date:	05/11/2007
Series:	Streetwise Business Guide Series
Sold by:	SIMON & SCHUSTER
Format:	eBook
Pages:	352
File size:	534 KB

About the Author

Michele Cagan is a CPA, author, and financial mentor. With more than twenty years of experience, she offers unique insights into personal financial planning, from breaking out of debt and minimizing taxes, to maximizing income and building wealth. Michele has written numerous articles and books about personal finance, investing, and accounting, including The Infographic Guide to Personal Finance, Investing 101, Stock Market 101, and Financial Words You Should Know. In addition to her financial know-how, Michele has a not-so-secret love of painting, Star Wars, and chocolate. She lives in Maryland with her son, dogs, cats, and koi. Get more financial guidance from Michele by visiting MicheleCaganCPA.com.

Table of Contents

Dedication     viii
Introduction     ix
Getting Started     x
Making the Choice to Incorporate     1
How Structure Impacts Your Business     2
A Brief Look at the Choices     4
Consider These Factors     7
Why Incorporating Is Better     11
Understanding the Disadvantages     12
Is It Time to Switch?     14
Meet the Different Corporate Types     15
"C" Means Regular     16
Making the "S" Election     16
Small Corporations Get Close Status     18
Professional Corporations     21
Not-for-Profit and Tax-Exempt     23
State Law Rules     25
Foreign or Domestic Is a State Distinction     25
The Best Things About Incorporating     29
Limited Liability     30
Tax Advantages     31
Access to Capital     34
The "Serious" Factor     35
Trouble-Free Transfers     36
Get Your Business Ready to Go     39
Test Your Ideas with a Business Plan     40
Transforming an Existing Business     43
Is Your Company Eligible for Regular Incorporation?     45
Coming Up with a Name     46
This Is Tricky, So Use a Lawyer     51
Add an Accountant to the Mix     53
Some Business Basics     54
Understanding Corporations     56
The People     57
Corporations Are "People"     58
Incorporators Get Things Going     59
Shareholders Are the Owners     60
The Board Directs Everything     62
Meet the Officers     66
The Paperwork     69
Articles of Incorporation     70
Corporate Bylaws     71
The Shareholders' Agreement     73
Keeping the Minutes     75
Corporate Resolutions     77
Stock Certificates     79
Taking Stock     81
Corporate Capital Structure     82
Different Types of Stock     84
Authorizing Shares     86
A Look at Par Value     88
Issuing and Selling Shares     90
What About Dividends?     92
Get to Know Securities Laws     95
Meet the SEC     96
Federal Securities Laws     98
State Securities Laws     99
The Basics of Exemptions      101
Private Offerings     102
Regulation D Is Your Friend     104
All About Limited Liability     107
What Is Limited Liability?     108
The Goal Is to Protect Yourself     108
More Liability Than You Realize     111
Corporations Provide a Shield     113
Some Things Are Not Covered     115
Piercing the Veil     116
Creating Your Corporation     118
The "Where" Decision     119
Why "Where" Matters     120
The Home-State Advantage     121
Setting Up in Delaware     122
Setting Up in Nevada     124
Interstate Business     126
Operating As a Foreign Corporation     128
Filing the Articles     131
Visit Your Secretary of State     132
Getting the Name Right     133
Information to Include     136
Choosing a Registered Office and Agent     137
Have Your Attorney Cross the T's     138
Filing Your Articles     140
Even More Paperwork     143
Signing in the Corporate Name     144
Licenses, Permits, and More     144
Retitling Assets      147
Set Up the Corporate Bank Account     149
The Corporate Records Book     150
How to Create the Bylaws     150
The Work Begins     155
The First Board Meeting     156
Issuing Shares     156
The First Shareholders' Meeting     159
Applying for "S" Status     162
The Case for Close Corporation Status     166
A Solid Shareholders' Agreement     169
Agreement Now Avoids Problems Later     170
Remember S-Corporation Restrictions     171
Different Regulations Govern Close Corporations     173
Voting Rules     174
The Basics of Buy-Sell Provisions     175
Situations in Which Shareholders Must Withdraw     178
How Much Are Your Shares Worth?     179
In the Absence of an Agreement     182
Maintaining Your Corporation     184
Corporate Formalities     185
Regular Board Meetings     186
Annual Shareholders' Meetings     187
Special Situations Call for Special Meetings     188
Taking a Vote     190
Keeping the Minutes     193
Filing Annual Reports     194
How to Avoid Penalties     195
The Importance of Preserving Limited Liability     197
The Advantages of Limited Liability     198
Why Your Corporation Needs Insurance     199
Keeping Things Separate     201
When the Veil Is Pierced     204
Charging Orders     208
Surviving Lawsuits     209
Day-to-Day Business Issues     213
The Business of Business Is (Mostly) the Same     214
Amending Your Articles of Incorporation     216
Maintain a Strong Corps of Professional Advisors     217
Determining Optimal Salaries     222
The Corporate Home-Office Advantage     224
Getting Additional Financing     225
Accounting Matters     231
What Kinds of Records Should You Keep?     232
Introduction to Basic Bookkeeping     233
Unique Corporate Transactions     236
A Special Equity Section     238
Financial Statements Track Success     241
Perform a Ratio Analysis     245
Leaving Your Corporation     251
Deciding When It's Time to Leave     252
Look Back at Your Shareholders' Agreement     253
Keeping It in the Family      254
Selling Your Business     257
Dissolving the Corporation     260
When Dissolution Is Involuntary     264
Taxes, Taxes, Taxes     266
Use the Tax Code to Your Advantage     267
Keep Abreast of Frequent Changes     268
Employee Compensation     270
Employee Stock Option Plans     272
Deductible Benefits     275
Income Splitting     275
Keep It In or Pay It Out?     277
The Corporate Tax Year     278
Regular Corporate Income Taxation     283
How C Corporations Are Taxed     284
Understanding Corporate Tax Rates     286
A Multitude of Tax Advantages     287
Some Distinct Tax Disadvantages     289
Qualified Small Business Stock     292
S-Corporation Income Taxation     295
Special Issues for S-Corporation Shareholders     296
Individual Tax Rates Matter More     296
Pass-Through Taxation     297
Understanding Basis     300
The Benefits and Drawbacks     302
The Impact of Shareholder Loans     305
Other Types of Tax Issues     311
Flat Tax for Personal-Service Corporations     312
Federal Corporate Tax Penalties     313
Tax Effects When Converting to a Corporation     315
State Tax Issues     317
Employee-Based Taxes     319
Sales Taxes     322
Special Rules for When You Sell Your Shares     323
Retirement Plans     327
Why Set Up a Retirement Plan?     328
Choosing the Right Plan     329
401(k) Plans     332
Simple Plans     335
The SEP-IRA     336
Profit-Sharing Plans     338
Target Benefit Plans     339
Employee Stock Ownership Plans     340
Glossary     343
State Business Development Office Contact Information     355
Index     366