FREQUENTLY
ASKED QUESTIONS
Q: What state should
I form in?
A: Generally speaking, you should form
in the state in which you conduct your
business in. However, if you conduct your
business in more than one state, you might
consider the various tax advantages of
each state you do business in to determine
which state is right for you. If you do
not form in your home state of business,
you may still be required to qualify as
a foreign entity in your home state which
would mean double the formation fees and
double the paperwork. Still worse, you
will be required to pay state taxes in
your home state because that's where you
are doing business. Give us a call we
would be more than happy to answer any
questions you have about incorporation.Call
Us Toll Free at 1-775-245-7480.
Q: If am self-employed,
how will incorporating my business benefit
me?
A: It benefits you in several ways.
(1) As a self employed person you have
to pay self employment taxes at the federal
level of 15% in addition to your personal
income taxes. With an S-Corporation, you
can cut your self employment taxes down
because you will only have to pay taxes
on money that is paid to you out of the
corporate bank account. For instance,
assume you are self-employed as a sole
proprietor and you make $100,000.00 this
year. You would have to pay to the IRS
$15,000 or 15% of this $100,000 as self
employment taxes, in addition, to any
other monies you owe the IRS for personal
income taxes. If you form a S-Corporation,
you can pay yourself a salary as an employee,
of say, $60,000/ year, and the $60,000
would be taxed at 15% and the remaining
$40,000.00 would not be taxed because
it was not received by you as an employee
but would stay in the corporate bank account.
You would only be required to pay the
IRS $9,000 rather than the $15,000 and
you would realize a tax saving of $6,000.
(2) In addition to this saving, as a sole
proprietor, you can only deduct a portion
of insurance for medical and dental premiums.
By incorporating, you can deduct 100%
of these premiums so long as all employees
of the entity receive these benefits equally
and without discrimination. If you are
a one person entity, that solves that
problem.
(3) Incorporation will protect you from
lawsuits. If you get sued, your personally
assets will be protected from attachment
and the debts of the entity will be owed
by the entity so long as you maintain
you annual meetings and operate the entity
in legitimate fashion observing corporate
formalities as required by state law.
(4 )By incorporating, you can use a entity
to build and repair your credit. For those
who have problems with their credit, incorporating
and obtaining a corporate credit can be
a wonderful way of creating new credit
and demonstrating credit worthiness so
that you may buy your first house.CNC
suggests that you consult with your attorney
or tax professional to make sure incorporating
is the best alternative for you.
Q:
Is my Corporate Name Available?
A: We will perform a non-binding name
check for name availability within the
state of incorporation. The name check
is preformed by us at no additional charge
where available. However, please remember
that the final determination is made by
the state officials; thus, never rely
on a corporate name check until AFTER
you have received a copy of your filed
Articles of Incorporation, stamped with
the state's approval. Most jurisdictions
allow you to telephone in and ask whether
the corporate name is available, or whether
it is in use by another company. Many
jurisdictions are updating their systems
and now allow you to check for your corporate
name via the internet. Some jurisdictions
will provide a name check over the telephone
for a charge of between $15 to $20. Still
some, however, will not provide name checks
over the telephone and require you to
physically enter the state office and
complete a form with the requisite information
before the state will perform a name check.
Q:
How long is the incorporation process?
A:
Processing times for incorporating a company
vary amongst the different states and
change constantly depending on the workload
at the state office. Please ask one of
our representatives for our most current
approximation of the processing time for
Articles of Incorporation within your
state of incorporation.
Q:
What is a Registered Agent?
A: Almost ALL jurisdictions require that
the entity designate a registered agent
for service of process. However, in most
cases, anyone who has a street address
(NO PO BOXES) within the state of incorporation
may act as a registered agent for the
entity. We can select a registered agent
service for you if you are in need of
such services. Persons who require our
registered agent services are usually
those who are incorporating in one state
(Nevada, for example) and operating a
business in another state (California,
for example). What are Articles of Incorporation?An
entity's "Articles of Incorporation"
is the main filing document which begins
the entity's existence under state law.
Once filed, the entity comes into existence.
The level of complexity for an entity's
Articles of Incorporation can range from
very simple to extremely complex. Generally,
most jurisdictions require Articles of
incorporation to contain, at a minimum,
information about the Corporate Name,
the Registered Agent, and the entity's
business address. Requirements vary by
state.
Q:
What are Bylaws?
A: Bylaws serve as the internal operating
document for the entity. Generally, Bylaws
detail the responsibilities, rights, and
duties of directors, shareholders and
officers. Currently states generally do
not require that Bylaws be filed.
Q:
What is a Corporate Officer?
A: Our forms allow you to name up to 6
officers for your entity. While most jurisdictions
allow the same person to act in all capacities,
that person has different responsibilities
depending on the capacity in which he
or she is acting.
REQUIRED OFFICERS · President ·
Treasurer · Secretary SECONDARY
OFFICER · Vice President
Although most jurisdictions allow one
person to serve in all three capacities,
the person's responsibility and authority
changes through the different officerships
the person assumes. For example, the President
is typically responsible for entering
into contracts on behalf of the entity,
the Treasurer is responsible for maintaining
and accounting for corporate funds, and
the Secretary is responsible for observing
corporate formalities and maintaining
corporate records. In addition to these
required officer positions, an entity
may also have vice presidents or other
officers. Typically, the authority and
responsibilities of each officer is described
in the corporate bylaws and may be further
defined by an employment contract or job
description. The President. The President
has the overall executive responsibility
for the management of the entity and is
directly responsible for carrying out
the orders of the board of directors.
He or she is usually elected by the board
of directors. The Treasurer. The Treasurer
is the chief financial officer of the
entity and is responsible for controlling
and recording its finances and maintaining
corporate bank accounts. Actual fiscal
policy of the entity may rest with the
Board of Directors and be largely controlled
by the president on a day-to-day basis.The
Secretary. The Secretary is typically
responsible for maintaining the corporate
records.
Q:
What is a Corporate Director?
A: The Board of Directors is essentially
the management body for the entity. Responsibilities
of the Board of Directors include establishing
all business policies and approving major
contracts and undertakings. In addition,
the Board may also elect the President.
Ordinary business practices of the entity
are carried out by the Officers and employees
under the directives and supervision of
these Directors. The Directors must act
collectively for their votes and decisions
to be valid. That's why Directors may
only act at a Board of Directors meeting.
This, however, requires certain formalities.
One such formality is that the Directors
must all be notified of a forthcoming
meeting in a prescribed manner, although
this can be waived or provided for in
the entity's Articles of Incorporation
or Bylaws. For a Directors' meeting to
be valid, there must also be a Quorum
of Directors present. A Quorum is usually
a majority of the Directors then serving
on the Board; however, the Bylaws may
specify another minimum number or percentage.The
Board of Directors must meet on a regular
basis (monthly or quarterly), but in no
case less than annually. These are the
regular Board meetings. The Board may
also call Special Meetings for matters
that may arise between regular meetings.
In addition, boards may call a special
shareholders' meeting by adopting a resolution
stating where and when the meeting is
to be held and what business is to be
transacted. The first meeting of the Board
of Directors is important because the
Bylaws, the Corporate Seal, Stock Certificates
and Record Books are adopted. Board members,
like officers, have a fiduciary duty to
act in the best interests of the entity
and cannot put their own interests ahead
of the entity's. The Board must also act
prudently and not negligently manage the
affairs of the entity. Finally, the Board
must make certain that it properly exercises
its authority in managing the entity and
does not abrogate its responsibilities
to others. This means that the board must
be very careful to document that each
Board action was reasonable, lawful and
in the best interests of the entity. This
is particularly true with matters involving
compensation, dividends and dealings involving
Officers, Directors and Stockholders.
The record or Corporate Minutes of the
meeting must include the arguments or
statements to support the Board action
and why must detail why the action was
proper.
Q:
Where can I get a Corporate Seal?
A: While many jurisdictions have abolished
the requirement of maintaining a corporate
seal, many entities still prefer to maintain
a corporate seal as a formality. Corporate
seals range in price from $8 (rubber stamp)
to about $75 (steel embosser). Please
contact your local stationer to obtain
a corporate seal. You'll need to know
the name of your entity and the date of
incorporation before you can order it.
Q:
What is a Federal Employer Identification
Number?
A: If you plan on opening a bank account
under your corporate name, most banks
will require that your entity have a Federal
Employers Identification Number. Furthermore
you may need this number to file your
tax return.
Q:
Does the entity have to issue stock?
A: Shares of stock represent ownership
of the entity. Where no shares are issued,
no individual owns the entity. Thus, shares
must be issued to those individuals who
will own the entity. While most states
have created many exceptions and exemptions
from registering a stock issuance with
the State or with the SEC for most small
businesses, it may be wise to contact
the appropriate entity to determine whether
you must file a notice of stock issuance
on a state or Federal Level. Because we
are an administrative service, our company
CANNOT be involved with your entity's
stock issuance. For help regarding your
entity's stock issuance, please contact
a licensed attorney or the appropriate
state entity.
Q:
What is Par Value?
A: A business entity must sell shares
of stock in order to capitalize the entity,
that is, provide the entity with its own
capital, separate from the money of its
owners. This separation provides part
of the support for shielding the shareholders
from personal liability for the debts
and obligations of the entity. Shares
of stock sold by the entity represent
proportionate ownership interests held
by shareholders in the entity. "Par
value" is a dollar value assigned
to shares of stock which is the minimum
amount for which each share may be sold.
There is no minimum or maximum value that
must be assigned. Shares may also have
"no par value," which means
that the Board of Directors will assign
a value to the stock below which the shares
cannot be issued. There is no minimum
number of shares that must be authorized
in the articles of incorporation. One
or more shares may be authorized. However,
the entity may not sell more shares than
it is authorized to issue and it must
receive consideration in exchange for
its shares.
Q:
Must I file a D.B.A.?
A: Individuals
and unincorporated entities that regularly
conduct business using an assumed name
(often referred to as a "D.B.A.")
must file an assumed name certificate
with the county clerk in each county in
which business premises are maintained.
If corporations, limited liability companies
or limited partnerships (entities created
by filing with the secretary of state)
do business with a name that is different
than the name set forth in the organizational
documents, they must file assumed name
certificates in the county or counties
where the registered office and the principal
office are located, and must also file
with the secretary of state.
Q:
If I incorporate, will doing so prevent
others from using my company name?
A: Incorporating will not keep another
business from using your name. Generally,
every business must protect its own business
name and the good will that it has acquired
from the sale of its goods or services
in a specific geographic area. Filing
articles of incorporation only prevents
the secretary of state from filing a document
to create another corporation, limited
liability company or limited partnership
that has the same, a deceptively similar,
or similar name as the entity already
in existence.
Q:
Can I protect a trade name nationwide?
A: There is no national registration of
trade names. Generally, businesses, including
corporations, protect their trade names
by registering their trade name as a service
mark or trademark if the trade name also
functions as a service mark or trademark.
Because of the legal complexities involved,
we recommend that businesses obtain private
counsel to get advice on how to protect
a trade name in interstate commerce.
Q:
Can the same person be the shareholder,
director and all officers of a corporation?
A: While jurisdictions will vary in their
requirements, most states require that
there be at least one director and two
officers, in a general, for-profit entity
. The required officers are President
and Secretary. Most states allow one natural
person to hold both offices and be the
sole director of the entity. Usually,
that one person may also be the sole shareholder.
A corporation may not be a director of
another corporation.
Q:Do
I need to publish a notice of incorporation?
A: While a few jurisdictions require publication
of the corporate name to be published
in a newspaper local to the county of
the registered agent (Georgia, Arizona,
Illinois, and Pennsylvania), most jurisdictions
do not require publication unless an existing
unincorporated business intends to incorporate
without a change in its name; that business
must then publish its intent to incorporate
in the local newspaper for four consecutive
weeks (in most jurisdictions).
Q:
What is the difference between a corporation
and an LLC?
A: Corporations are formed pursuant to
state law and have shareholders, are managed
by a board of directors, and the daily
affairs are administered by officers.
Similarly, a limited liability company
(LLC) has members and may be managed by
one or more managers. Most often, both
entities must pay franchise taxes, but
may have different federal tax liabilities.
Generally, most people form corporations
or limited liability companies in order
to shield the shareholders or members
and officers or managers from personal
liability for the debts and obligations
of the entity. There may also be various
tax advantages to forming these entities
which may not be available for sole proprietorships
and general partnerships. We cannot provide
information as to whether a person should
incorporate or form a limited liability
company or a partnership. If you are contemplating
forming any of these entities you should
consult with private counsel regarding
your individual fact situation.
Q:What
is a nonprofit corporation?
A: This is a corporation which is formed
with the purpose of benefiting the public
in some religious, scientific, educational
or charitable way. Because of this charitable
purpose, most jurisdictions do not require
these corporations to pay income taxes
on monies it earns. In addition, nonprofit
corporations may achieve tax exempt status
for charitable contributions by obtaining
what is known as 501(c)(3) status. Please
consult your attorney or accountant for
more specifics and advice on whether this
entity is the one for you to form.
Q:
What is the difference between an S-Corporation
and a C-Corporation and Limited Liability
Company as far tax ramifications?
A: If you do not make an election with
the Internal Revenue Service (FORM 2553)
or with the appropriate State Agency,
you will be considered to be a C-Corporation.
A C-Corporation will be subject to double
taxation. It will be taxed one time at
the corporate level and one time when
distributions or dividends are given to
shareholders. For example, assume a corporation
earns $100,000 for the first year. The
corporation must pay taxes at its own
tax rate. Assume the corporation distributes
the $100,000 to the sole shareholder of
the company. This shareholder will have
to pay taxes on this dividend as well;
therefore there is double taxation.If
you prepare and file Form 2553, you will
be an S-Corporation. A S-Corporation is
subject to single taxation and the profits
earned by the S-Corporation are taxable
to the shareholders according to the individual
income tax brackets and their ownership
interest in the company. In other words,
a 100% shareholder will report the full
gain on his/ her individual income tax
returns. If you are 50% shareholder and
the corporation earns $100,000 for the
first year, that 50% will report only
$50,000 as income earned for this year.
A limited liability company is taxed similarly
to an S-Corporation in that there is only
single taxation. The difference is that,
generally, an LLC files a partnership
tax return whereas an S-Corporation must
file a corporate tax return. To determine
which entity to form consult with an attorney
or accountant. CNC is simply a document
preparation service.
Q:
What is a state filing fee?
A:
Each state charges it's own state filing
fee for the formation of any entity. The
fees vary from state to state and from
entity to entity. The fees are also subject
to change.
Q: What is meant
by "Our Fee for Preparing & Filing
Articles of Incorporation "?
A: This is simply the fee that we, Center
for Non Profit Creation charge for the
preparation & filing of your Articles
of Incorporation. What is meant by "Our
Fee For Preparation of Your 501c3 Application"?
This is simply the fee that we, Center
for Non Profit Creation
charge for the preparation of the Form
1023.
Q:
What is meant by "Our Fee for Preparing
& Filing Articles of Formation"?
A: This is simply the fee that we, Center
for Non Profit Creation charge for the
preparation & filing of your Articles
of Formation.
