Archive for the ‘Business Incorporation Service’ Category

Changes in Incorporation Services for the Recession

The current global recession has had a devastating effect on businesses. Many organizations have to be closing their shutters due to a fall off in business and the inability to source funding. This has had a negative effect on the income generating capabilities of state governments, as a large proportion of their income comes from taxation and licensing of these organizations. To counter these effects and launch an attempt to kick-start their economy, state boards are developing various mechanisms and strategies to encourage incorporation of companies.

Initiatives
Not long ago, going to government offices to process documents was a whole day trip. You had to take along some refreshment and some form of entertainment to occupy your time while waiting in a never-ending line. With the advent of the recession and fall off in business, governments have switched to outsourcing these duties by turning to the internet. They have successfully created a new industry for agents certified by the necessary bodies to prepare and file applications on customer’s behalf.

In addition, customers can file their documents via the secretary of state’s web site for any type of corporation. All associated fees are payable via electronic payment systems. These measures have resulted in a two-fold positive effect for both the government and the customer. The government saves millions by reducing their staff levels as well as the wear and tear on their facilities, while customers enjoy the ability to process their documents in a more relaxing environment.

Some states have also relaxed some of the requirements for specific types of organizations. These include:

• No age limit on members or share holders
• The restrictions of the number of LLC members

Non-Profit Business Incorporation and Tax Advantage

Corporations involved in areas like education, scientific research, religion or charity can apply for nonprofit business incorporation. Such incorporation provides limited liability to the members of management. Incorporating a nonprofit company helps in its legal protection to safeguard the personal savings as well as assets from the activities of the corporation. Most forms of nonprofit business incorporation take the benefit of 501(c)(3) tax-exempt status with the Internal Revenue Service (IRS).

Nonprofit corporations that get 501(c)(3) tax exempt status have the following benefits:
• The directors, officers as well as members have complete personal asset protection as well as limited liability
• Tax exemption from federal income tax
• The incorporation is eligible for grants from private and pubic bodies
• The donations offered to these nonprofit incorporations are tax deductible
• They have perpetual existence which means that if the director or owner decides to leave the corporation or passes away, the business still continues to exist
• Property taxes exemption

The main reason for setting up a nonprofit corporation is to get funds from various government agencies as well as from private organizations. Though it enjoys tax-exempt status as well as personal liability protection, it has its own legal and taxation procedures. It is very important to find out all taxation details prior to setting up a nonprofit corporation. As non-profit corporations are business organizations involved in public service, they need to follow special rules. Unlike a for-profit business in which the profit is distributed among owners and shareholders, with a nonprofit setup all the profit remains within the corporation.

Business incorporation glossary

Each type of business has its own terminology that explains its inner workings. Business incorporation is no exception with a collection of words that often pass between lawyers, representatives and clients. Here is a brief list of terms and their meanings that are used often in the world of business incorporation.

Articles of Incorporation
This is often referred to this as a charter or a certificate of incorporation, the articles of incorporation must be filed with the proper state authorities and must convey the purpose of your corporation, the name, the primary place of business, names of directors, and the amounts and types of stock it is authorized to issue.

Asset
An asset is anything owned that has monetary value.

Bylaws
Bylaws are the rules and regulations adopted by a corporation for its internal governance. Bylaws usually contain provisions relating to shareholders, directors, officers and general corporate business. Bylaws are a private document not filed with any state authority. Bylaws are more flexible than the articles of incorporation because they are easier to amend.

C Corporation
A C corporation is simply a standard business corporation. It is called a C corporation because it is taxed under subsection C of the IRS code.

Directors
Directors are elected by the shareholders. They manage or direct the affairs of corporation. Typically, the directors make only major business decisions, major policy changes and monitor the activities of the officers. They are the people who primarily manage the corporation.

EIN or Employer Identification Number
This form is used to apply for a federal tax ID number.

Federal Tax Identification Number
This is a number assigned to a corporation or other business entity by the federal government for tax purposes. Banks generally require a tax identification number to open bank accounts. The federal tax identification number is also known as the Employer Identification Number (EIN).

Limited Liability Company
A Limited Liability Company is a hybrid company between a partnership and a Corporation. The advantage of a Limited Liability Company is that most states require fewer formalities be observed in an LLC in comparison to a corporation.

Nonprofit Corporation
People in nonprofit corporations come together to either benefit members of an organization or for some public purpose, such as a hospital, environmental organization or literary society. Nonprofit corporations can make a profit, but the business cannot be designed primarily for profit-making purposes, and the profits must be used for the benefit of the organization or purpose that inspired the corporation. These corporations can apply for tax-exempt status at both the federal and state level. Not-for-profit corporations must file not-for-profit articles of incorporation with the state.

Officers
The directors appoint officers. They manage the daily affairs of the corporation. A corporation’s officers usually consist of a president, vice-president, treasurer and secretary. In most states, one person can hold all of these posts.

Partnership
A partnership is owned by two or more people, who are personally liable for all business debts and obligations. A general partnership can come into existence without the need to file any formal papers with any state official.

Pass-Through Taxation
The income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is “passed through” the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns. S corporations and LLCs are both pass-through tax entities.

Shareholder
A Shareholder is any holder of one or more shares in a corporation. A shareholder usually has evidence that they are a shareholder; this evidence is represented by a stock certificate.

Sole Proprietorship
A business owned and managed by one person, who is personally liable for all business debts and obligations.