Business Incorp

An LLC is usually the best type of entity to form to hold property. If one of your tenants slips and falls and sues you, the amount of your liability is limited to the assets in your LLC. Most investors form an LLC for each property they own. If you were to put all of your investment properties in one LLC and one tenant slipped and fell and sued you, all of the assets in your LLC would be at risk. An LLC does not have a board of directors so there is no record keeping requirements. Please ask your accountant or attorney for more information on which type of entity is best for you. A certified financial planner is also a good resource.

5. I have a contracting business in California. Can I form a Nevada corporation?

You can form a Nevada corporation for any purpose. If I was doing business in California, I would form a California entity. In the event of a lawsuit, I would hopefully be protected by California law. At least my personal assets should be if I have incorporated correctly. Nevada corporations can be formed to manage companies, and other creative management techniques can be used by forming Nevada corporations. If you are actually working in California, and you want to form a Nevada entity to avoid California taxes, it is not a good idea. On the other hand, if you have a consulting company and you work all over the US, you can form a Nevada corporation as your headquarters, and working for the Nevada corporation anywhere in the world. Any income you receive from your Nevada corporation would be reported to you from your Nevada corporation in the form of an IRS form 1099. Of course, you will be responsible for paying taxes on any income you receive from your corporation.

6. I am going through a nasty divorce. Can I use your nominee services to protect my identity?

If you use our nominee service, we list our name on the public record documents. When the public record documents are filed, we resign and appoint your officers and directors in the form of corporate minutes. If you are testifying in court and are asked if you are involved in a Nevada corporation, you would perjure yourself if you said no. The nominee service is used for people who are private and do not want their friends or relatives to know what they own.

7. I sell candles on the internet. My buyers are located all over the world. Can I form a Nevada corporation or LLC for my business?

Yes. Your Nevada corporation will have its principal location here. If you earn income from your Nevada corporation, you must report that income. If you live in a state that has a state tax, like California, you will have to report any earnings you make from your Nevada corporation on your California state tax return.

8. How long does it take?

Three weeks for our standard price, $299. We offer an expedited service for an additional $175 (total cost $474). If you place your order with us at 11:00 a.m. today, we will pick your papers at 11:00 a.m. tomorrow and send them to you. Please see our prices for more information.

9. How can I check to see if the name I want is available?

Go to the Secretary of State's website. Type in the name you want. If no records are returned, your name is available. If you want to check A.F.C. Real Estate Investments, search for "AFC Real Estate". Try not to use punctuation in your search for better results.

10. What type of entity should I form?

Some of your options are to operate as a sole proprietor,

It depends on what type of business you are doing. Do you want the flexibility of adding owners or officers in the future? If yes, a corporation has the flexibility to be able to do this. An LLC is set up with the intention that it will have the same owners from the beginning to the end. An LLC is not intended to transfer ownership interest. For example, in Vegas one of our major cab companies has created an LLC for each of its cabs. Instead of creating an LLC to hold all of its cabs, only one cab is the asset in each LLC. In the event a cab gets into an accident and is sued, the LLC is sued and has only 1 cab. Not a fleet. Quite a surprise to a money hungry plaintiff.

An LLC does not have a board of directors. There are no requirements to hold meetings. No corporate minutes to be kept. Minimal record keeping requirements is one of the advantages of having an LLC.

It comes down to the decision is up to you. You will get a lot of opinions from incorporators. Remember, they are just opinions. The majority of resident agents are not lawyers, nor are they accountants.

11. What do you need?

1. Articles of Incorporation or Organization.
2. A resident agent in Nevada.
3. Bylaws for a corporation or an operating agreement for an LLC.
4. An employer ID number.
5. An initial list of officers or members must be filed with the Secretary of State six weeks after your company is formed. The Secretary of State charges $125 for this List.
6. A Nevada Business License. NRS 360.780 states that any business filing an IRS form 1120, 1120S, 1065 or 1041 for either 2003 or 2004, or individuals required to file a federal tax schedule C, E or F along with their 1040 form for 2003 or 2004 is required to obtain a state business license. There is an exemption to this statute for someone that has a home based business and had a net income of less than $21,500 last year. Rental property in Nevada is not considered a home based business. For more information, please go to the Nevada Tax Department's website http://www.tax.state.nv.us.

11. Do I need a bank account in Nevada?

It is not a requirement. If you are forming a business, why wouldn't you establish a bank account for it? If you are doing business, you are going to have expenses. You should use a business account to pay for those expenses. We have a bank account section below for more information.

12. What are the advantages of incorporating in Nevada?

There is no state income tax. The Nevada Secretary of State's website provides a list of advantages. Click here to go to that page. Owners can be anonymous. Stock certificates can be made to "the bearer". The identity of the stockholder is not required to be disclosed to the State or any other agency. A board of directors in Nevada can meet every day and replace officers. Nominee/anonymity services work in Nevada because of this provision. Click here for additional advantages.

13. How do I get an employer ID Number?

An employer ID number can be obtained online , over the phone, by fax, or by mail. Its free. IRS website - http://www.irs.gov

14.

Here is an excerpt taken directly from the State of Nevada, Department of Taxations' website.

NEVADA DEPARTMENT OF TAXATION - WHAT YOU NEED TO KNOW ABOUT NEVADA’S BUSINESS LICENSE

Effective 7/22/03, all businesses doing business in Nevada must obtain a State Business License as required by SB8 of the 20th Special Session of the Nevada Legislature.

1. Q. What is the cost of a State Business License? A. The State Business License Fee is $100. The license is renewable annually.

2. Q. How much is the renewal fee and when is it due? A. The renewal fee is $100. Taxpayers who currently have a business license shall pay the renewal fee based on their anniversary date. Entities no longer in business in this state must submit a written statement to the Department at least 10 days before their anniversary date in order to avoid the annual fee and a penalty for non-payment.

3. Q. What is the penalty for late or non-payment? A. A person who fails to submit the annual fee required by the due date shall pay a penalty in the amount of $100 in addition to the annual fee. This penalty goes into effect 07/01/04.

4. Q. Are there any other requirements for businesses obtaining a State Business License? A. Every business that purchases tangible personal property for storage, use or other consumption in this state must register with the Department of Taxation for a Use Tax Account.

5. Q. What constitutes a business? A. A corporation, partnership, proprietorship, limited-liability company, business association, joint venture, limited-liability partnership, business trust and their equivalents organized under the laws of the State of Nevada or another jurisdiction shall be deemed to constitute a business for the purposes of NRS 360.760 through NRS 360.795 regardless of any purpose for which that entity is organized or operated and regardless of whether that entity conducts an activity for profit.

6. Q. Are any businesses not required to obtain a State Business License? A. Government entities, nonprofit religious, charitable, fraternal, or other organizations that qualify as a tax-exempt organization pursuant to 26 U.S.C. § 501(c), or a business whose primary purpose is to create or produce motion pictures are not required to obtain a State Business License. A “Limited-Liability Company which consists of a single member if the limited-liability company is disregarded for the purposes of federal income taxation as an entity separate from its owner, and a natural person who is regarded as a substantial owner of any trust or portion thereof pursuant to the provisions of U.S.C. 671 to 679. Also, a person who operates a business from his home and earns from that business (net income from the business reported on the Federal Tax Return) not more than 66 2/3 percent of the average annual wage, as computed for the preceding calendar year, pursuant to chapter 612 of NRS, is not required to obtain a State Business License for the next year. The average annual wage fluctuates, for 2003 the 66 2/3 percentage of the average annual wage is $21,500. For 2004 the 66 2/3 percentage of the average annual wage is $22,000.

7. Q. What is meant by “person who operates a business from his home”? A. A person who operates a business from his home means a natural person who does not own, lease, rent or license any real property, other than his personal residence, for use in furtherance of that business and does not hold any part of his personal residence open to the general public. A natural person shall not be deemed to own, lease, rent or license any real property that he uses strictly for the purpose of maintaining a post office box, posting a business license in accordance with requirements imposed by a county or municipal ordinance, or periodically selling or exhibiting wares at craft shows.

8. Q. Are trade show or convention participants required to obtain a State Business License? A. A business not located in this State that takes part in a trade show or convention held in this State is not required to obtain a business license specifically for that one event.

9. Q. Are businesses selling at swap meets in this State required to apply for a State Business License? A. Yes, they are considered to be renting space outside of their personal residence and are required to apply for a State Business License.

10. Q. Are real estate agents and brokers required to apply for a State Business License? A. Yes, they are not considered to be working from their personal residence and are required to apply for a State Business License.

11. Q. Are a husband and wife considered one taxpayer? A. Yes, as long as the business is not separately incorporated.

12. Q. How do I obtain a State Business License? A. You may obtain an application by downloading one from our website at http://tax.state.nv.us or by contacting the Nevada Department of Taxation office nearest you. When submitted, the application must be accompanied by the $100 license fee. A signer’s signature on an application is considered a sworn statement of his or her authority to sign on behalf of the entity being registered.

13. Q. If I have several businesses, but they are all owned as sole proprietor businesses, do I have to get State Business Licenses for each one? A. Sole proprietors may have more than one business and only be required to have one State Business License. However, if a person is a sole proprietor and also conducts business under a separate corporation or other entity, State Business Licenses will be required for each entity.

14. Q. Miscellaneous—A Business is required to keep all records for four years. The same or similar provisions which exist for other Title 32 taxes regarding audits, confidentiality of information, administrative procedures, etc., are applicable to this license fee.

15. Q. What are some examples of businesses that are now required to apply for a business license that were not required to apply prior to the implementation of SB 8 of the 20th Special Session of the Nevada Legislature?

A. Sole proprietors without employees were not previously required to obtain a State Business License. However, employer status no longer is a factor in determining which businesses must register for a State Business License. All businesses are now required to obtain a State Business License unless they are exempted for one of the reasons listed above in #6. In addition, individuals who lease or rent out property and report this on a Federal Tax Return form 1040 schedule E and individual owners of farms who report on a Federal Tax Return form 1040 schedule F must also obtain a State Business License.

*********************** end of excerpt

Here is the Nevada Business Registration form and supplement. http://www.tax.state.nv.us/taxnew/documents/Nevada_Business_Registration.pdf

Make sure you include this supplemental form: http://www.tax.state.nv.us/taxnew/documents/APP-01.01%20Supplemental%20Application%20_Revised%2012-03-03_2.pdf

15. Do I need a social security number?

Not to form a corporation or LLC, however, you will need a social security number or individual taxpayer ID Number to open a bank account. If you do not have a social security number or individual taxpayer ID number, you will have difficulty opening a bank account. The form to get an individual taxpayer ID number is available on the IRS website. http://www.irs.gov

16. How many people does it take to form a corporation or LLC?

One.

17. How old to you have to be?

18.

18. Where can I read the Nevada Revised Statutes regarding Corporations? Click here for a link to Nevada's Revised Statutes.

19. Where can I read the Nevada Revised Statutes regarding Foreign Corporations? Click here for a link to Nevada's Revised Statutes.

20. Where can I read the Nevada Revised Statutes regarding Corporations Sole? Click here for a link to Nevada's Revised Statutes.

21. Where can I read the Nevada Revised Statutes regarding LLCs? Click here for a link to Nevada's Revised Statutes.

22. Do I need to file a dba or fictitious firm name certificate?

Only if you are going to do business with a name different than your incorporation name. Example: Tim Johnson and George Johnson want to form a corporation. They form it and call it Johnson & Johnson, Inc. Now they want to start a business and call it Auto Parts 'R Us. They file a dba or fictitious firm name certificate that indicates Johnson & Johnson, Inc. will be doing business under a fictitious name, Auto Parts 'R Us. Tina Smith formed a company called Candles of Las Vegas, Inc. She wants to operate her business as Candles of Las Vegas, Inc. She does not need a dba or fictitious firm name certificate. Need a form to file a dba/Fictitious Firm Name Certificate? Here is a link. http://www.co.clark.nv.us/clerk/pdf/FFN_Forms/FFNCert.pdf

23. Should I hire an attorney or an account?

It is a good idea. We are not attorneys. We are not accountants. Most resident agents/incorporators are not attorneys or accountants.

B. COSTS/FEES

How much does it cost to incorporate?

The Secretary of State's filing fee is $125 to file articles of incorporation or articles of organization. The fees are based on the value of the stock. Why pay $700+ to incorporate? Don't. You get the same service for $499 with us, as you will with a $1200+ incorporation. Six years ago our $499 price was $650. We reduce our prices every year to stay competitive. The Secretary of State's filing fees are public record. Click here to see the filing fees

Why are the prices so different? I see some incorporations for $199 and some for $2500.

The $199 incorporators usually offer incorporation in all states. Sometimes they only provide 6 month resident agent service or you need to pay the state filing fees too. Sometimes it's a good deal. Make sure you know exactly what's included in the $199 price. When we started this business in 1997, our standard incorporation price was $675 (it's $499 now) and our most expensive package was $1675. We have lowered our costs to stay competitive. We believe that we provide a good service at an affordable price. Before you pay $2500, shop around.

What are the annual fees?

$320. The $320 is a total of $125 to the Secretary of State, $95 to Call Us, and $100 to the State of Nevada, Business License Department. The Secretary of State charges $125 to file an annual list of officers or members. (Note: The $125 annual filing fee for corporations is based on the value of the stock in the corporation. The more value you have, the more the fee is.) The second fee is a resident agent fee. We charge $95 a year. The State of Nevada charges $100 to maintain a State Business License.

Are there other fees after I form my company?

Yes, Within six weeks after you form your company an Initial List must be filed with the Secretary of State. The filing fee is $125. In addition, the State of Nevada now requires that you obtain a State business license. The annual fee for the State business license is $100. We will help you get the business license.

HOW TO ORDER YOUR NEW CORPORATION OR LLC

How do I place my order with you for my new corporation or LLC?

You can order online, call us, print the order form and send it to us by fax or mail. We accept Mastercard and Visa, or we have a paypal account where you can pay using your personal check, debit card, or other credit cards.

What happens after I place my order on your online order form?

We check your name to make sure it is available. We file your papers and send them to you the same day we receive them. If you choose our standard service, the process takes three (3) weeks. If you choose the expedited service, the process takes 24 hours.

After I place my order, can I check the status?

Yes. You can go online or contact us. To go online, go to the Secretary of State's website. Type in your company name and press submit. If the search returns your company information, your company has been formed. If no records are found, your order has not been processed. Please feel free to contact us for additional information.

NAMING YOUR NEW BUSINESS

How can I check to see if the name I want is available?

You can go to the Secretary of State's website and type the name in. If there are no records returned, the name you want is available. If you want B.K.F. Investments, Inc., type in "BKF Investments" without the periods. If your search returns an existing "BKF Investments, Inc., you cannot use that name. The periods are not enough to distinguish a difference. You can use BKF Investment Group, inc. if it is available.

Do I have to use an Inc. or Corp. after the name I want?

This is what the statute reads: "NRS 78.035(1) The name of the corporation. A name appearing to be that of a natural person and containing a given name or initials must not be used as a corporate name except with an additional word or words such as “Incorporated,” “Limited,” “Inc.,” “Ltd.,” “Company,” “Co.,” “Corporation,” “Corp.,” or other word which identifies it as not being a natural person." You can use something like "Berry Business Services." No ending is needed. However, if you use "Russ Berry". You have to use "Russ Berry, Inc.", an ending must be included so that it is not identified as being a "natural person."

Do I have to use "LLC" after my LLC name?

This is what the statute reads: "NRS 86.171 Name of company: Distinguishable name required; availability of name of revoked, merged or otherwise terminated company; limitations; regulations. 1. The name of a limited-liability company formed under the provisions of this chapter must contain the words “Limited-Liability Company,” “Limited Liability Company,” “Limited Company,” or “Limited” or the abbreviations “Ltd.,” “L.L.C.,” “L.C.,” “LLC” or “LC.” The word “Company” may be abbreviated as 'Co.'."

BANK ACCOUNT INFORMATION

Do I need a bank account?

It is not a requirement. It makes good sense to keep your business expenses and income separate from your personal unless you are doing business as a sole proprietor.

Where should I get a bank account, in my home state or in Nevada?

If your principal office is located in Nevada, why would you establish your bank account any where else? If you establish your account with one of the larger banks, like Wells Fargo, then you will be able to bank anywhere you see a Wells Fargo. You can bank online and mail in deposits too.

Do I have to come to Nevada to open my bank account?

No. We work with Wells Fargo Bank and they can help you establish your account through the mail.

What is the bank going to require?

Your articles of incorporation or organization, your employer ID number, and your list of officers. The bank will want information from each of your officers. Your officers will need to have a social security number. The minimum deposit is $100. If you want to change officers at any time, you can do so in the form of corporate minutes. Your board of directors can meet and remove the officers and appoint new ones. It might be easier if only one person is listed as all of your officers. Then only one person will have to provide the bank with personal information.

CORPORATION INFORMATION

What are articles of incorporation or organization?

That is the document that is filed with the Secretary of State that forms your company.

What are bylaws?

The document that provides how the company is to be managed. An operating agreement is used for an LLC, similar to Bylaws for a corporation.

How many shares of stock do I need?

The standard number of shares is 75,000. The ownership in your company is represented by stock. You must issue stock to have ownership. One share of stock can be issued, and that person is an owner in your company. You can issue one share to someone for $5 and one share to someone else for $50. The board of directors determines the price of the stock. If you need more shares of stock in the future, you can file an amendment to your articles of incorporation to increase the number of stock. Of course, there is a fee to file an amendment.

Do I need a corporate book or seal?

No. It is not required. You are free to get a corporate minute book, seal, or stock certificates on your own. A lot of incorporators make money off the books, corporate supplies. Check around before you buy. We use www.nevadalegalnews. They have a quality book and seal. You can go to a search engine and type in corporation supplies and choose your own company. A seal is not necessary in Nevada. Here's an excerpt directly from the Nevada Revised Statutes about a seal. "NRS 78.065 Adoption and use of corporate seal or stamp. 1. Every corporation, by virtue of its existence as such, shall have power to adopt and use a common seal or stamp, and alter the same at pleasure. 2. The use of a seal or stamp by a corporation on any corporate documents is not necessary. The corporation may use a seal or stamp, if it desires, but such use or nonuse shall not in any way affect the legality of the document.. . "

How can I be anonymous/how does your nominee service work?

We offer nominee services to keep your name off the public records. In Nevada, the board of directors can meet any time and remove officers and appoint new ones. We file your articles of incorporation using our name. The same day your articles are filed, we resign and appoint your new officers (in the form of corporate minutes, the corporate minutes are not required to be filed with anyone). On your initial list of officers, we will list our name as your officers. The same day your initial list is filed, we resign. If you want someone to act as your officers and director for purposes other than this, do not use this service. Please find another resident agent. If you are in need of someone to act as an officer to sign a power of attorney or any other document for your company, we will not do it. There are companies offering complete nominee services, for a considerable fee of course. We are nominee officers for the sole purpose of keeping your name off public records. If you are trying to hide from someone, attempting to get around a non-compete agreement, going through a nasty divorce and trying to hide assets, please call someone else.

Why is 75,000 shares of stock the standard amount issued?

That is the amount of stock the Secretary of State has stated in its price to form a corporation. You can have as many shares of stock as you want. The price of your incorporation is based on the value of stock. So is the annual fee. The more value of your stock, the more it is to incorporate, and it will cost more for the annual fee.

How do I issue stock?

Usually a company receives a letter (subscription agreement) from the person who wants to buy the stock. The board of directors meet and determine whether or not it is in the best interest of the company to accept the person's offer to buy the stock. This meeting is documented in the form of corporate minutes. Then a stock certificate is issued to the person buying the stock. This information is recorded in the company's stock ledger. In Nevada, a corporation can issue shares of stock to "the bearer". This can be an attractive selling tool to an investor. There are a lot of people who want to invest in a corporation but do not want that information known to the public. You have to be careful when issuing "bearer" shares. Anyone that is in possession of a stock certificate made to "the bearer" is the owner. Could be quite a fiasco if you lose a certificate.

What is Section 1244 stock?

Tom and Joe formed a corporation. They issued 10,000 shares of stock to each other. They each paid $100,000 for the stock. During the year, each of them would need to contribute $50,000 to cover expenses. Although the additional $50,000 (called a capital contribution) has not changed their ownership percentages, the corporation must issue additional shares of stock in order for any potential loss related to the contribution to qualify as Section 1244 stock. Without issuing additional stock certificates, the $50,000 that Tom and Joe put in would just be an additional contribution to the corporation, and would not qualify as 1244 stock.

What is an S Corporation?:

An S or Subchapter S corporation is one in which the profits or losses flow through to the individual shareholders. If you decide to form an S corporation, you must file an IRS Form 2553 within 75 days of the date of your incorporation. We complete this form for you, free. An S corporation can only have 35 shareholders. The IRS requires that: ( 1) there be less than 75 shareholders, ( 2) the shareholders must be individuals, estates or certain qualified trusts, who consent in writing to the S corporation election, (3) the shareholders can not be non-resident aliens, and (4) an S corporation cannot issue preferred shares of stock with special liquidation, dividend or conversion rights. Here is a link to the IRS instructions for the Form 2553.

What is a C Corporation?

Most of the corporations we form are C or closed corporations. This C or Closed status means that the profits or losses from your corporation will not flow through to the individual shareholders. An 1120C tax return is filed. A " C" corporation may have an unlimited number of stockholders. A C Corporation is usually selected by companies than plan to have over 30 stockholders or large public stock offerings. C corporations face "double tax" as they are required to pay income tax on taxable income generated by the corporation and the shareholders pay tax again on distribution of dividends.

What is a Professional Corporation?

An attorney is a good example of someone who would set up a professional corporation. Other people that use this type of corporations are doctors, architects, engineers, etc. The Secretary of State requires a document accompany your filing that is issued from the board governing your profession. For example, a lawyer would have to attach a copy of his or her certification from the State Bar of Nevada that they are licensed to practice law.

Non Profit or Not For Profit Corporations: A non profit or not for profit corporation cannot make a profit and is usually established for charitable, educational, religious or scientific purposes. A nonprofit corporation must qualify for tax exempt status with the IRS and the state in which it does business. The articles of incorporation must state the specific nature of the business. The tax-exempt status is not obtained from the Secretary of State. It is obtained from the IRS. You must file a form 1023 with the IRS to elect the tax exempt status. The corporate bylaws will also contain specific information about the operation of the business. The business purposes are set out in the Tax Code under 501(c)(3). If the IRS approves your exemption, your corporation is exempt from paying federal corporate income taxes. Officers and directors in a for profit corporation are not personally liable for the debts and obligations of the corporation. The same is true of a nonprofit corporation. A nonprofit corporation can receive public and private grants. Contact an accountant for additional benefits. We are not tax experts, CPAs or qualified to provide an expert opinion in tax matters. As always, it pays to consult a professional if you have questions. You must file an IRS form 1023 within 15 months after the date you form your corporation.

What is a corporation sole?

The corporation sole is a not for profit corporation. The purpose of the corporation must be for a religious purpose. Click here for the NRS statutes regarding corporations sole. According to NRS 84.020, the following has the authority to make the articles of incorporation: "an archbishop, bishop, president, trustee in trust, president of stake, president of congregation, overseer, presiding elder, district superintendent, other presiding officer or clergyman of a church or religious society or denomination, who has been chosen, elected or appointed in conformity with the constitution, canons, rites, regulations or discipline of the church or religious society or denomination, and in whom is vested the legal title to property held for the purposes, use or benefit of the church or religious society or denomination, may make and sign written articles of incorporation, in duplicate, and file one copy of the articles, together with a certificate of acceptance of appointment signed by the resident agent of the corporation, in the Office of the Secretary of State and retain possession of the other."

The corporation's purpose can be for acquiring, holding or disposing of church or religious society property, for the benefit of religion, for works of charity, and for public worship, in the manner provided in NRS 84.010.

Once incorporated, you can decide how to be treated for tax purposes. You can file for a 501(c)(3) exemption. Usually associated with non-profit corporations. Or, you can file for a mandatory exception. Ask your accountant and attorney for their opinion regarding your tax status.

The name that you name your company must contain the name of the person making the articles, and the title of his or her office. Here is an example of a corporation sole name: "Office of Overseer, Berry Ministries, and his successors, a corporation sole." Here's another example: Lawrence Frank, as Overseer of Amen International, and his successors, a corporation sole." Your company name MUST be followed by the words, and his [or her] successors, a corporation sole."

Due to the fact that we are not tax professionals, we will not be able to assist you with your tax election. If you need an Employer ID Number for your corporation sole, you can get one without having a social security number. Please note, we will form your corporation sole for you, but we cannot provide you with tax advice, nor we will be able to get your tax election from the IRS for you.

How long does it take to form a corporation?

Three weeks for $299. Twenty-four (24) hours for $474.

What is piercing the corporate veil?

When someone suing you can prove that your corporation was acting as an individual and not as a corporation, i.e., you have no corporate minutes or consents to document the decisions of board of directors. We have form minutes, or there are websites offering free corporate minutes.

What is par value?

It generally means the amount at which a security can be issued or redeemed. Corporations are most often formed with 75,000 shares of stock, with no par value. Corporations do this because it helps them avoid a liability to stockholders should the price take a turn for the worse. Par value is not the same as market value. Because your stock has no par value, it does not mean that the value is zero. Your board of directors will meet and determine the value of the stock before it is issued.

What is an S or Subchapter S Corporation?

An S or Subchapter S corporation is one in which the profits or losses flow through to the individual shareholders. Some people set up this kind of a corporation if they know that their business will operate as a loss for the first years. If you decide to form an S corporation, you must file an IRS Form 2553 within 75 days of the date of your incorporation. We complete this form for you, free. An S corporation can only have 35 shareholders.

What is Section 1244 stock?

This is stock that was issued for money or property. During its 5 most recent tax years before the loss, this corporation must have derived more than 50% of its gross receipts from other than royalties, rents, dividends, interest, annuities, and gains from sales and trades of stocks or securities. You can deduct as an ordinary loss, rather than as a capital loss, a loss on the sale, trade, or worthlessness of section 1244 stock. Report the loss on Form 4797, Sales of Business Property, line 10. Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Do not offset gains against losses that are within the ordinary loss limit, explained later in this discussion, even if the transactions are in stock of the same company. Report the gain on Schedule D of Form 1040. If you must figure a net operating loss, any ordinary loss from the sale of section 1244 stock is a business loss.

Ordinary loss limit. The amount that you can deduct as an ordinary loss is limited to $50,000 each year. On a joint return the limit is $100,000, even if only one spouse has this type of loss. If your loss is $110,000 and your spouse has no loss, you can deduct $100,000 as an ordinary loss on a joint return. The remaining $10,000 is a capital loss. . If the corporation was in existence for at least 1 year, but less than 5 years, the 50% test applies to the tax years ending before the loss. If the corporation was in existence less than 1 year, the 50% test applies to the entire period the corporation was in existence before the day of the loss. However, if the corporation's deductions (other than the net operating loss and dividends received deductions) were more than its gross income during this period, this 50% test does not apply. Please ask your accountant for more information.

The stock must be issued to the person taking the loss. You must be the original owner of the stock to be allowed ordinary loss treatment. To claim a deductible loss on stock issued to your partnership, you must have been a partner when the stock was issued and have remained so until the time of the loss. You add your distributive share of the partnership loss to any individual section 1244 stock loss you may have before applying the ordinary loss limit.

Tom and Joe incorporated their business. They issued 10,000 shares of stock to each other, and paid $100,000 each for the stock. During the year, it would take each of them contributing another $50,000 to cover expenses. Although the additional capital contribution ($50,000 each) has not changed their respective ownership percentages in the corporation, the corporation must issue additional shares of stock in order for any potential loss related to the contribution to qualify as Section 1244 Stock. Without issuing the stock certificates, the $50,000 that each person put in would just be an additional contribution to the corporation, and would not qualify as Section 1244 stock.

In April 2001, Russ invested $100,000 in Golf Accessories, Inc., a manufacturer of golf accessories, which is a qualified small business. In January, 2002, Russ sold the Golf Accessories company stock for $135,000. She purchased Tom's Computers stock on February 10, 2002 for $130,000. Tom's Computers is a manufacturer of computer equipment and meets the small business requirements of Internal Revenue code section 1202. Tom's Computers is involved in the active conduct of business for the six-months after Russ purchased the stock.

Russ met all of the requirements; sold small business stock which she held for at least 6 months, repurchased small business stock within 60 days, and Tom's Computers met the active business requirement for 6 months after the date of purchase. Because she met all of the requirements, Russ can roll over a portion of the gain from the sale of Golf Accessories. Russ must recognize $5,000 of the gain on sale of the Golf Accessories stock, the amount that was not rolled over. The $30,000 rolled over gain reduces the basis of Tom's Computers stock. The holding period of the Tom's Computers stock is deemed to begin in April 2001, the date of the purchase of the Golf Accessories stock.

Consult with your accountant, or see Section 1244 of the Internal Revenue Code for more information.

LIMITED LIABILITY COMPANY INFORMATION

What is an LLC?

A limited liability company. It is owned by members. Instead of stock, there is 100% membership interest. If you are an owner in a corporation, you are a shareholder. If you are an owner in an LLC, you are a member. There are no officers. You do not have a president, secretary, treasurer, or director. Just members. There is no board of directors. There are two ways to form an LLC regarding management. (1) The members can manage the company or (2) they can appoint a manager. A manager does not have to be an owner/member. There is 100% membership interest (no stock) in an LLC. The 100% is divided between the members. One person can hold all 100% membership interest. There is no requirement that the board of directors meet and document the company's decisions. There is no board of directors, so the record keeping for an LLC is minimal. This is one of the attractions to form an LLC.

How is an LLC formed?

By filing the articles of organization with the Secretary of State.

How many people does it take to form an LLC?

One.

Can a corporation be a manager of an LLC?

Yes.

I want to form an LLC but I will want to add investors in the future.

An LLC is set up with the intention that the owners will be the same from the beginning to the end. However, the members of an LLC can transfer their interest to a new member.

Is an LLC required to keep minutes?

No.

How is an LLC treated on the Employer ID Number Application?

On Line 8a of the SS4 Employer ID Number Application, you must determine how your LLC will be treated for tax purposes.

Here are your choices: (1) you can be a disregarded entity, separate from its owner, and include all of the company’s income and expenses on the owner’s tax return, (e.g., Schedule C (Form 1040)). If you want to be treated this way for tax purposes, check the "other" box and print "disregarded entity." (2) a two member LLC can be treated as a partnership. Check the Partnership box. (3) You can be treated as a corporation. If you choose this election, you can be treated as a C or closed corporation or an S or Subchapter S corporation. The Subchapter S is where the profits or losses of the company will flow through to the owner’s individual tax return. If you want to be treated as a corporation, check the "corporation" box and write in "single-member" if your LLC only has one member, or write in "multi-member" if your LLC has more than one member. If you choose this option, you must file IRS Form 8832. If you are going to be treated as an S corporation, you must also file IRS Form 2553. You do not need the IRS Form 8832 if you choose 1 or 2 above.

WE CANNOT DETERMINE YOUR TAX STATUS FOR YOU. IF YOU ARE IN DOUBT AS TO WHICH ELECTION, PLEASE CALL YOUR ACCOUNTANT AND GET HIS OR HER OPINION. YOU CAN ALSO CALL THE IRS AT 1-800-829-1040 TO GET THEIR OPINION ABOUT THE ELECTION.

What do we need from you to form your LLC?

1. The name of your company. Please have two names available. Your first choice might already be taken.
2. How do you want your LLC managed? By the members or by a manager.
3. The name(s) of the members. And the name of your manager if you want your LLC managed by a manager.
4. Your payment to Call Us.

What are the annual fees for an LLC?

$95 to Call Us for your annual resident agent service.
$125 to file a List of Members with the Secretary of State.
$100 to the State of Nevada to maintain a state business license.

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