Entity Choice Generally

How much additional overhead costs will I incur if I transfer my business into a Corporation?

In addition to the expenses you’ll incur for forming your corporation or LLC, there will be a number of expenses you should take into consideration when weighing the pros and cons of operating from an entity. Here’s a short list: an additional tax return (CPA fees), $800 minimum to the California Franchise Tax Board (regardless of [...]

February 19th, 2020|0 Comments

Does the Corporate Transparency Act require me to file a report on the ownership of my corporation or LLC?

Yes. WHAT IS IT? The Corporate Transparency Act (CTA) became effective on January 1, 2024. For the first time, the United States now will require certain legal entities to report to the federal government identifying information about the individuals who directly or indirectly own or control a company within the scope of the new legislation. [...]

November 6th, 2023|0 Comments

I keep hearing about having to pay $800 to the California Franchise Tax Board every year just because I formed an S Corporation or an LLC. True?

Not only is it true . . . it's worse than you think. When it comes to LLCs [link to what is an LLC], the FTB collects a tax (the FTB calls it a [ahem] "fee") above the $800 if the LLC's revenues meet or exceed $250,000. Here's a link to the graduated fee scale. The [...]

December 14th, 2022|0 Comments

Is there a lot of paperwork? Do I have to do it all?

There’s some paperwork . . . corporations tend to have more paperwork, which is why some people might immediately gravitate to LLCs, or nothing at all. And, yes, if you want to maintain your status as a corporation, and maintain your limited liability, don’t cut corners on the paperwork. It’s important.

July 12th, 2015|0 Comments

I just put my business into a corporation/LLC. Do I have to file paperwork for that?

If you have an existing business, then its assets and contracts should get transferred to your corporation. This can look like an assignment, or a bill of sale. There are tax considerations regarding contribution of the assets of your existing business. You may also need to notify third parties, such as vendors and landlords. A stitch in time, as they say. Paperwork is king.

June 15th, 2015|0 Comments

Is there more paperwork with an S Corporation than, say, with an LLC?

The answer in most situations is going to be yes. One of the virtues of an LLC is its simplicity. Once you choose to form your business as a corporation (and then an S Corporation), or to have your LLC elect to be taxed as an S Corporation, costs for tax returns, payroll, corporate state compliance paperwork, and other accounting items get triggered. You'll need to balance the benefits of an S Corporation against the ease of use that comes with an LLC.

March 5th, 2016|0 Comments

Will there be a background check for me to incorporate?

No. You may get background checked as a vendor, even if you put your business in a corporation. But incorporating does not require any background checking.

July 12th, 2015|0 Comments

What’s a “distribution”?

In lay terms, a distribution is another way of saying a payment to a shareholder, partner or member of the business’s profit. Typically the distribution is in the form of cash, but sometimes it’s in the form of property like an asset. What you receive typically depends on your percentage interest in the business. So [...]

September 2nd, 2020|0 Comments

What’s the bare minimum I need to operate as a corporation?

In terms of capital (i.e., cash money), it depends on your business; one common rule of thumb is 3 months’ worth of cash to run the business. If you mean compliance, you’ll need annual minutes and, in California, an annual filing with the Secretary of State. You’ll also need to memorialize extraordinary transactions, like leases and financings, in your corporate records. Without minutes and/or consents, you could expose the shareholders personally to liability.

August 8th, 2015|0 Comments

What are corporate minutes?

Corporate minutes memorialize actions voted on and authorized by the corporation’s shareholders and directors at duly noticed meetings. Keeping these minutes up to date is critical to maintain the corporation’s liability shield, because without them, a claim could be made that the corporation as an entity separate from its shareholders wasn’t being treated seriously and [...]

February 19th, 2020|0 Comments