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How To Set Up A Corporation: Forming Your LLC, S, or C Corp By Tedd Johnson, income.com
Which Type of Corporation Is Right for You? There are many different reasons for considering the birth of a sole proprietorship, an ‘S’ or a ‘C’ corporation. Many of those reasons will deal with things such as liability for debts, damages, and the ever present need to limit the tax liability you and others will incur. A brief discussion about some of these will be appropriate and then we will get down into the actual setting up of the type of corporation you are thinking about.
ADVANTAGES & LIMITATIONS
C CORPORATION
SUBCHAPTER S CORPORATION
LIMITED LIABILITY COMPANY
(What most corporations are be default)
(A special corporation owned by only a few persons)
Double Taxation
Yes
No (Although it sometimes does on state taxes)
No (Unless the owners chose to set it up differently)
Protects owners from personal liability
Yes
Yes
Yes
Can sell different classes of ownership in the company
Yes
No
Yes
Can sell different classes of ownership in the company
Yes
No
Yes
Has tax exemptions
No
Yes (From self employment tax on profits)
No
Limit on number of owners
No
Yes (No more than 100)
No
Can be owned by other companies or
Yes
No
Yes
Source: http://income.com/tutorials/how-to-set-up-a-corporation-forming-your-llc-s-or-c-corp/
SOLE PROPRIETORSHIP This is the most common form of ownership used by many of the Internet Marketers and most other very small business people. This is often what is entered into, even for some of the large companies as start ups. They will, usually, quickly change this form into something else; however, it is helpful in the beginning. This form of ownership ties the owner and the business together as one entity. You, as the owner, are responsible for all debts and enjoy all the profits. The tax liability is yours for the entire amount of net profits.
The ‘S’ CORPORATION This form of corporation will allow you to pass all of the profits to the
shareholders so that not all earnings of the corporation are a tax liability for you, personally. You are one of the shareholders, possibly the controlling shareholder, and you are taxed on only the amount you receive, as an employee of the corporation. There are restrictions on what companies cannot be ‘S’ corporations, however, if you have less than 75 shareholders and all of them are US citizens and you are not a bank or other financial institution, this will be a popular choice for you.
The ‘C’ CORPORATION This is the standard form of corporation in the United States. The primary advantage, of course, is the shield it provides for liability in the
case of someone slipping on your floor and hurting themselves. One of the disadvantages, based on your point of view, is the double taxation. When the ‘C’ corporation makes money, it pays corporate taxes on that money. Whatever is left over, after retained earnings are either saved or spent on capitol investments or other expenses, is distributed to the share or stock holders. As an employee of the corporation, you receive a ‘salary’ which is then taxed at the normal personal tax rate you currently enjoy (?). Consulting your attorney or having a conversation with your accountant or tax expert would be appropriate to identify the best form of corporation
to take. It is necessary to point out that many companies start with one form and move to another to safeguard their interests and make for the best liability / tax treatment. A brief discussion of some of the tax benefits will be held at the end of this exercise.
HOW TO SET UP A CORPORATION FOR AND BY YOURSELF The basic steps to take in setting up a corporation will be: 1. Choosing a corporate name and address, 2. Select a State in which to incorporate, 3. File ‘Fictitious name’ registration, 4. Determine company Directors, 5. File ‘Articles of Incorporation’, 6. Create Corporate ‘By-Laws’ 7. Hold first Shareholder meeting, 8. Process and file all incorporation paperwork with registered agent 9. Obtain the Certificate of Incorporation, and 10. Obtain appropriate licenses and permits.
There will be intermediate steps we will be going through as we proceed with this process.
1. Choosing a Corporate Name and Address A corporate name must end with the suffix of ‘Inc., Incorporated, Limited, Corporation’ or the like. Whatever name you have come up with must be verified with the state you will be incorporating in to ensure it is available for use and not being used or
contested by some other entity. It also can not have any word that could imply it is part of a governmental entity, such as ‘Federal, government, US’ or anything that could confuse people about association with official entities. A quick check with the Corporation Board in the state oincorporation may cost a few dollars for the search; however, it will save a lot of time and embarrassment. The address must be a physical location where the offices will be located and where any person to person business will be conducted. This address can change later; however, to get the ball rolling, a solid address is necessary.
2. Select a State in Which to Incorporate Identify which State you will be incorporating in. The best of all answers is the State in which you reside. This will make it a lot easier and a few less questions that you will have to answer.
3. File ‘Fictitious Name’ Registration If you are naming your corporation after your own name, this will not be necessary. But what is fun about that? You will be selling products or services as the ABC Company or something, so your State needs to know that that means you. As you proceed along with this process you will be telling them that you are actually going to be ABC Company, Inc..
4. Determine Company Directors Deciding on the Directors for your corporation is, sometimes, as easy as naming the owners as directors. Most States do not require that the owner or owners must be directors. These are usually selected as a means of ensuring you have enough expertise to handle all of the major decisions that need to be
made. They will be involved in deciding all financial matters. They will also have the say in issuing stock and when that can be done. The policy decisions that must be made will usually come from this august body. Be sure to identify the regulations, in your State of incorporation as to the minimum, usually one, and the maximum number of directors. These will be listed in the business plan and in the Articles of Incorporation you prepare for various reasons. Choose these individuals carefully. It is recommended that the first one chosen is then enlisted for assistance in choosing the others. It would help, although not required, that some have a background in law and others have demonstrated abilities in advertising, Website construction, e-commerce management and all other areas of need to complement you and can help provide direction as their namesake would indicate.
5. File ‘Articles of Incorporation’ The filing of this paperwork can be done in a few minutes by filling out a form in the state capitol, usually at the corporate board or Secretary of State’s office. This is sometimes called a ‘charter’ or a ‘certificate of incorporation.’ As a single owner, you would fill this out and sign your name as the owner and ‘incorporator’. If there is more than one owner, they may all sign or one can be designated to sign for the whole body.
This simple form will require information such as the name of company, its physical address and the name of the Directors. There will also be a designation of a ‘registered agent’ for the corporation. This will be you or one of the other owners. It might also be one of the Directors. This person will be the point person for contacting the Corporation for any and all legal matters and must be empowered by it to address those matters. This is simply notice that official incorporation papers will be coming, later.
can also get an attorney to do this for you; however, the various forms are appropriate for most applications.
7. Hold First Shareholder Meeting The first meeting of the Shareholders will need to be held fairly soon. In this first meeting, several things will have to be decided in order to move forward:
7. If the new corporation will be an ‘S’ corporation, a unanimous election of the ‘S’ corporation status must also be made. In accordance with the laws, in every State, minutes should always be taken for each meeting and the tallies of any legally binding votes will also be made. (For this reason, the secretary is almost always voted on first.) As you are issuing the stocks, it is important to maintain detailed records
6. Create Corporate ‘By-Laws’ The By Laws are the rules that the board of directors will use in the day to day operation of the corporation. It addresses issues such as when the shareholders meetings are held and what voting rights are allowed for classes of board members. In addition to these, it puts into plain language: 1. The issuance of stock and how each class will be treated in relation to all meetings held, 2. How to deal with proxy votes 3. Specifies how Special meetings are to be called and who should attend, 4. How dividends, if any, are to be considered, 5. What constitutes a Quorum for purposes of conducting meetings. 6. Conduct, meetings, quorums and business activities of the Board of Directors will also be put into this document, 7. Compensation to the Board of Directors as well as the election of all officers will be spelled out, 8. Other issues spelled out as needed. There are several websites that will allow you to download a formatted By-Laws form. All of the normal ‘boiler plate’ is already present which will stand in any State within the United States. There will be blanks for names, addresses and the various dates that will need to be filled in. You
1. The appointment of Directors. This can be as informal as you simply making them aware that they are what you have asked them to be. There can also be an election if there are more members present than Board members needed. 2. Adopt the By-Laws. This will have been put together, already, or it can be discussed and formed within this meeting and then formally accepted by means of vote or by acclamation. 3. Decide on the fiscal year, 4. Appoint or elect officers of the board, 5. Identify the type of stock being issued, whether common or preferred and how many will be offered, and at what price, 6. Authorize the issuance of the stocks previously established and creating the certificate, itself, and a corporate seal for them.
of the person purchasing the stock, how many and what price as well as how the shareholder will be paying for them. In some States, a statement must be made to the State corporation board as to these transactions. It is important to note that you should not operate in the Corporation’s name until these stocks have been issued, even if they are only issued to you. This activity is the means whereby the corporation is, indeed, a corporation and you must have that to enjoy the benefits that a corporation gives you. Large amounts of stock being sold or any public offerings of stocks must be registered with the Securities and Exchange Commission in your State of incorporation.
8. Process and file all incorporation paperwork with registered agent An Articles of Incorporation must be prepared to announce all that you
have developed to the State corporation board. It may seem like you are simply reporting all of the many details you have hammered out, however, it is important for the registering all of that with the State so they know about you and the new corporation you have started. In this form, you will set out the following: 1. Your new corporation name, address and the ‘incorporator’s’ name and contact information, along with the form of the corporation taken, such as ‘S’ or ‘C’. 2. The type of business in which you are involved as will as a specific description of this business. A statement such as: ‘The ABC Company, Inc. will be selling Internet Marketing lessons, products and services to a World Wide market’. 3. State whether the corporation will be or stay private or whether it will go public and approximately when that may occur. 4. Indicate the number and classification of stock certificates that have been sold and the par value of those, 5. A statement of the form of your corporation will need to be made, 6. The management structure will be listed and how taxes are to be paid, 7. The By-Laws that have been established and accepted by your shareholders will be attached as well as a listing of the major stockholders, 8. Also list any of the many regulations that may exist that could restrict your activities in major areas. Upon the completion and submission of this form, the State will issue the Certificate of Incorporation.
9. Obtain the Certificate of Incorporation This will be mailed to you and it can be hung up, in a nice frame.
10. Obtain appropriate licenses and permits Now that you have a new business entity, all of the licenses must either be renewed under that new name or new applications made. This would include a business license in the City, County and or State you will be operating in. This will also be a permit for the building you will be occupying, if appropriate. You will also need an employer’s identification number from the IRS and a reseller’s number if appropriate.
Notes of Conclusion There are definite benefits to incorporating your business and some of these will help business men and women make this decision. It is not entered into lightly, as there are legal restrictions and some element of control of the business being lost. This is made up for by some of the better tax treatments and do not forget the, possible, reputation enhancement that comes with ‘Inc.’ being associated with your new enterprise.
Some Benefits of Incorporation The ability to raise capitol easily, or at least easier. The ability to gain investors in a way as to limit their liability is a matter of offering stock. Many investors will appreciate this way to multiply their money without having to work for it. The choice of a tax year that is closely associated with the cycle of
your industry is beneficial in many areas. This can be selected, as a ‘C’ corporation, but not an ‘S’ corp. The ability of stock owners to be able to sell their stocks, without permission, makes for a flexible and ever changing ownership base. The corporation can outlive its owners. The ownership, through stocks and controlling shares, can be passed down to allow family ownership to continue. The protection of liability is one of the top reasons. This allows the corporation to be liable for things that go wrong or losses to be absorbed by it as a separate entity. Favorable tax treatment. This is probably the best reasons people find to incorporate. In the ‘C’ corporation type, you, along with all other owners, are employees of the corporation. You get a check every month just like everyone else. The corporation can be very profitable, with most of the earnings going back into capitol expenditures and you will only pay personal income taxes on that check you get. Without the corporation, you would be on the hook for all of the taxes for all of the profits you make and still have to make those capitol expenditures. With the Sub-chapter ‘S’ Corporation, all of the profits are passed through the corporation to each of the owners, if that selection has been made by all members of the shareholders. This will allow them to only pay taxes on the income they receive in their paychecks. Furthermore, in an ‘S’ corporation, if there are losses, they can be passed back to the shareholders, so they can be reported as losses and reduce their tax liability.
About Income.com Income.com is a forward thinking community promoting entrepreneurialism in America. The platform income.com hosts is based on synergistic education and learning for those desiring to start or enhance the American economy one small business at a time.
E
ntrepreneurs stay in startup mode way too long. Keeping a small business in startup mode requires you to stand on the brake. If you keep telling people you're "just a startup," you will never take actions for real growth.
5 Ways to Get Out of Startup Mode And Grow Your Business BY GRANT CARDONE
business. Be ready to quickly explain what your company does that is better, faster and of value to the marketplace. Then, make big claims to the world.
It's time to move from startup to grown up mode and from planning to doing. In two years, you want to look back at your startup phase as an important part of your thriving business' history. You want to say,"I remember when I was sitting on my floor packing boxes myself. Now I employ over 100 people." This is the mindset to move towards and here are five ways to do it:
1. DELEGATE. When you're in
5. CREATE URGENCY. If you start a
3. GET ATTENTION. The single
startup phase, you are handling everything. To become a going concern you have to start investing in people to do tasks you can no longer do. Three quarters of all small businesses have zero employees, which underscores the resistance people have to delegating. You have to grow your business. It is a misnomer to think people cost money. A lack of production and failure to grow your business costs far more.
biggest problem every startup has is becoming known. Your most important task is to get attention for you and your company. It's the gateway to every dollar you raise. Muhammed Ali told the world he was the greatest long before anyone knew him. He got attention and infuriated people. But he proved himself, which turned criticism into world admiration. Get attention. Get critics. Then get admiration.
2. PICK YOUR BATTLES. Don't get
of saying "I own a small web design company," say "I own a web design company like none other that guarantees your company increased sales." Notice the difference? The first makes you seem small and insignificant. It makes no claim. The second makes you seem unique, confident and capable of being a money maker. Know how to pitch yourself and your
wrapped up for a week deciding on a logo when it ultimately doesn't matter. Your brand will evolve as your business evolves, so your logo is likely to change. There are more important things to obsess over -- gaining customers and making money. When you are hunting big game, don't swat mosquitoes.
4. CHANGE YOUR PITCH. Instead
About the Author Grant Cardone is an international business and sales expert. He has authored 4 business books and customized sales training programs for Fortune 500 companies, small businesses, success-minded individuals and entrepreneurs.
business venture without setting specific timelines for action and achievements, you will be stuck forever with excuses. One of the biggest mistakes I have made in business was not operating with enough urgency. Being an entrepreneur is a marathon activity with lots of sprints. Win a lot of little races and you will provide your people and company with momentum. We recently shot a television show at my office and I told the editing staff that I wanted rough cuts in half the time they thought necessary. Then I called everyday for a progress update. This pressure to perform doesn't lead to inferior products; it get products to be finished. Urgency is key to getting things done. Remember: Your vision is not improved by staying in startup mode. It's time to accelerate and become a going concern that is grabbing market share from the other bigger more established players. It used to be the big who ate the small. Today, it is the fast who eat the slow. * This article originally appeared on Entrepreneur.com.
He is a New York Times best-selling author regularly appearing on Fox News, Fox Business, NBC, and MSNBC, offering commentary and insights on a slew of topics affecting the economy, business, leadership and matters affecting the middle class. For more author insights please visit www.grantcardone.com
Mobile Marketing: Use the Four Media Types in Promotion By Gini Dietrich DO I NEED A MOBILE SITE? In the agency world, we talk a lot about the four media types: Paid, earned, owned, and shared. There is lots of content written about how to use each of the four, how to integrate them, and what they mean for increased revenue. But, unless you live and breath mobile marketing, it’s rare for that conversation to leave an organization’s website and reach it’s mobile site (assuming, of course, there is a mobile site).
During a Marketing Over Coffee episode this summer, Christopher Penn and John Wall talked about how to know when it’s time to build a mobile site. Go into Google analytics and click on audience, mobile, overview. Set your date range for the past month. If less than 10 percent of people are visiting your site on their phones or tablets, you’re still okay not to have a mobile site…yet. Though you should consider responsive design, at the very least.
If more than 10 percent are using their mobile devices to visit your site, you’re behind the curve ball and need to consider a site specific to those visitors. The Spin Sucks mobile visitors are nearly 30 percent, which is why you have a different experience there than on your computer (see image above; the mobile site is on the left and the website is on the right).
MARKETING YOUR MOBILE SITE As you build your mobile site, you have to think about advertising options that introduce your app,
product, service, or organization to a wider audience. You have to think about ways you can improve what you’re selling through content you create to increase awareness, and usage, trials, and/or sales. You have to think about how to engage current customers or users in social spaces to help you spread the word. And you have to think about what will interest journalists and bloggers to help you tell your story.
be sure your landing page is up to snuff. If you don’t have an app, you can do something similar with your mobile site. Consider the following: • Use the same keywords you use in your paid media on your mobile site
The key, of course, is to strike the right balance to achieve your goals.
What do you do? Look for more affordable paid media options where people might look for what you’re selling online such as review sites, forums, discussion groups, and communities. Buy ads on review sites, on YouTube channels that have something to do with your industry, and sponsor Facebook or Twitter posts.
INTEGRATE WITH OWNED MEDIA If you have an app, you want to optimize your landing page with iTunes. This, of course, isn’t technically owned media because iTunes owns it…not you. But an estimate 80 percent of app search happens within the app store so
Figure out who you think can help you, comment on their content, share it, find something in common, and build a relationship. They’ll be much more willing to help you if they consider you a friend (even an online friend) than if you pitch them blindly. When stories and blog posts do run, make sure there are links to your app landing page or to your mobile website. mobil
USE PAID MEDIA COST EFFICIENTLY In many cases, paid media is out of reach for organizations. Let’s say, for example, you have an app and you want to get it into the top one or two pages of your key category. A display media blitz might be too expensive on iTunes.
can help you. Just like you wouldn’t go to a networking event, introduce yourself to someone new, and ask them to buy your product, the same goes with earned media.
FOLLOW-UP WITH SHARED MEDIA
• Create a landing page that is specific to your product or service • Have contextual calls-to-action that drive people back to the landing pages • Create content that is interesting, valuable, and engaging for your visitors…and is something different than they can get on your website
USE EARNED MEDIA There are right ways and wrong ways to work with influential bloggers and journalists. The wrong way is to go online, Google “how to write a news release,” create one, and then send it to everyone you can find who might write about what you do. The right way is to build relationships with the people who
ABOUT GINI DIETRICH Gini Dietrich is the founder and CEO of Arment Dietrich, a Chicago-based integrated marketing communications firm. She is the lead blogger here at
It’s likely not a surprise the most effective shared media tactic is to integrate social tools into your mobile website. This turns every visitor into a brand ambassador and every social share into an endorsement. You’d think this would go without saying in 2013, but do a test on your own. Look at 10 mobile websites. How many have social share buttons? I’m willing to guess not even half. Of course, you have to orchestrate all of this to work together and at once. It will look like – to the outside world – you came out of nowhere. To make it look that way takes a good six to nine months of preparation. Give yourself enough time, plan, and execute flawlessly. * This article was originally published at http://spinsucks.com/marketing/ mobile-marketing-use-the-four-m edia-types-in-promotion/.
Spin Sucks and is the founder of Spin Sucks Pro. She is the co-author of Marketing in the Round and co-host of Inside PR. Her second book, Spin Sucks, is due out in on December 18, 2013.
BRANDS AND BELIEFS Mark Di Somma talks with Tom Asacker
For me, brands, and more particularly the cultures that support them, should be seen as belief systems rather than pure-play marketing systems. Purpose, values and ethics are the oxygen of successful marques because they inspire consumers to see qualities in the brands they choose that make them feel more human, more real and more desirable. This year, one of my favorite thinkers, Tom Asacker, published a new book, his fifth, titled The Business of Beliefs. It’s an examination of how and why we assimilate beliefs and what we do with them. And of course it’s a discussion that is highly pertinent to all marketers because not only are brands today in the business of belief, but they only work if the people in the business believe in what they are there to achieve.
I caught up with Tom recently and asked him to tell me more. Here’s my “greatest hits” from what he had to say:
1. WISHES DRIVE BELIEFS Tom: The word “belief” comes from the Middle English “lief,” which means to wish. Belief is simply a working assumption about something or someone … driven by what we would wish something to be.
2. PEOPLE FORGE MEANING OUT OF PARTIAL INFORMATION Tom: Stories are powerful because they express our beliefs. We make meaning out of partial information … We have past experiences, which we spin into a coherent story, and revise when necessary, to rationalize previous actions and make us feel good about ourselves, our associations and decisions. I refer to this as “connecting the dots”. Some brands are very good at presenting us with “dots” — through their varied and evolving
communications and behaviors — such that we create a coherent and motivating whole. Apple is the classic example. People wanted to believe in the exclusive and unique quality of the Apple brand, so much so that they were willing to pay a premium and evangelize the brand. So Steve Jobs orchestrated every single touch point, including something as seemingly insignificant as the product packaging, to communicate and enhance that belief.
3. BRANDS ARE ACTUALLY IN THE BUSINESS OF GENERATING MEANING Tom: People’s expectations change, because their experiences in the marketplace change and their desires evolve. Great brands lead [that] change. It’s a process of continuous learning, discovery and creation of new meaning, which drives profitable growth and adds value to the lives of customers, employees, owners, partners, and the community. [Brands work for us because] it’s impossible to consciously evaluate all
of our daily choices and decisions. However, when the choices we make are not giving us the outcomes we desire, it’s time to pay very close attention to [our] beliefs.
4. FINANCES MEASURE OPINIONS Tom: [Brands] need to be very opinionated today, especially about what they are in business to accomplish, beyond making money. Financial measurement is simply a way to gauge how well a brand is executing on its opinions, on its theories about how the marketplace is evolving and its unique role in that evolution.
5. YOU ARE NOT YOUR HISTORY Tom: We all become the stories we tell ourselves. Changes in belief are always prompted by experiences, feelings and thoughts. Great designers are in tune with our present beliefs and design new ones that make it easy for us to adopt and evangelize.
6. IDENTITY IS NOT THE SAME AS NARRATIVE Tom: Narrative is something the mind invents from past experiences. Identity is the result of what someone does and creates in the here and now. What’s Nokia’s identity? They were a manufacturer of paper, then cables, then rubber boots. They were also the world’s
leading manufacturer of mobile phones. Those were their identities. Their identity today is much different. You are what you do, not who you were.
7. BRANDS DIE BECAUSE THEY FORGET HOW TO DREAM Tom: Expectations evolve, therefore so do beliefs. If established brands
won’t, or can’t, innovate to satisfy these emerging beliefs and desires, others will step in to make it happen. Customers lose belief when their desires are not being met, or when something or someone else is better at stimulating and satisfying those latent desires. When brands forget how to dream, the passion for the possible and for the customer typically goes with it.
ABOUT THE AUTHORS Mark Di Somma is a creative strategist. He works with senior corporate decision makers and communication agencies at critical moments of change. Through his blog Upheavals, he writes about creative strategies for brands in a shifting and social world. To find out more, you can subscribe to his newsletter or follow him on Twitter at @markdisomma. Tom Asacker writes and teaches about radically new practices and ideas for marketplace success in times of uncertainty and change. The Business of Belief is his fifth book. You can purchase his book here, subscribe to his blog or follow him on Twitter. This interview first appeared on Branding Strategy Insider.
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