Entity Incorporation in US

What are Benefits of Business Incorporation in USA?

Why Incorporate in USA?

At this time of year, many sole proprietors and general partnerships may be wondering if it’s time to create a formal business structure. If your client is still on the fence, here are some major reasons a small business would choose to incorporate or form an LLC:

• Liability protection
• Asset protection
• Credibility
• Building Business Credit
• Issuing out stock options
• Risk of manufacturing among founders/partners
• Gaining Tax advantages

What is the Popular Entity Choices Incorporate in USA?

If you have clients that come to you for advice on selecting a business entity, it’s important for     you to be educated on all of the options to select the best fit.

• Sole Proprietorship
• Partnership
• C Corporation
• S Corporation
• Limited Liability Company (LLC)
• Professional Corporation (PC)
• Professional Limited Liability Company (PLLC)
• Non – Profit Corporation

Business Formation Options in USA 

Sole Proprietorship	A Sole Proprietorship is easy to form, but it offers little liability protection, funding options, and opportunities for future growth.
General Partnership	A General Partnership is the most basic form of partnership. It is comparable to a sole proprietorship, but it must have at least two owners or partners.
C Corporation	The C Corporation is the most common form of corporate entity. The C Corporation is owned by shareholders. The shareholders elect a board of directors to create and direct the high – level policies of the business.
S Corporation	An S Corporation is different from a C Corporation in two significant ways: 1)    An S Corporation makes an election to be taxed as a “ pass-through entity” and 2)    An S Corporation has limitations on ownership.
Limited Liability Company	A Limited Liability Company is a popular business structure because it combines the liability protection offered by incorporation while retaining some of the tax advantages of a Partnership or Sole Proprietorship.
Professional Corporation	Individuals who provide a professional service can also benefit from forming a Professional Corporation. Where a business provides a professional service, most states have special filing requirements when incorporating.

When to Incorporate?

Timing Options

Now that you and your clients are aware of their business formation options and the benefits of incorporating or forming an LLC, you both need to decide the best time to file the paperwork. General options are:

• Mid – year
• End of year
• January 1

Mid-year Considerations

When forming an LLC or incorporating a business mid-year a business needs to submit two sets of tax forms when filing. Many business owners prefer to avoid this.

• Tax return for the business entity type it operated as during the months before its incorporation date
• Tax return for the LLC or Corporation for the months it operates as such for the remainder of the year.

End of Year Considerations

December tends to be an extremely hectic month for Secretary of State offices across the country. Many entrepreneurs want to get their LLCs and corporations registered for the New Year, so expect a back log of filings.

• Registering a business at the end of a calendar year is the busiest time of year for most states
• What might take just a few weeks normally can take a lot longer
• Waiting until December to register a business could mean that your application gets backed up into February or March

January 1 Considerations

Besides December, January is the next busiest month for Secretary of State offices. Entrepreneurs find a January I start date to their Corporation or LLC has perks.

• January I gives a clean start so that a business only needs to file one set of tax forms for the current tax year
• In states that levy LLC franchise taxes, an LLC that files with effective date of January 1 would not have to pay fees for prior year
• The same applies to other corporate formalities when a business entity has an effective date of January 1

Delayed Filing Option

What is a Delayed Filing?

• A delayed filing provides control over when a corporation or LLC goes into effect
• In states that allow delayed effective filing dates, business owners can set the date when they want their company to be officially filed with the Secretary of State, yet file the paperwork now to prevent delays
• Entrepreneurs can select an effective date of January 1, which makes things nice and clean, yet can get all of the paperwork done ahead of time

Advantages of a Delayed Filing

• Streamline the tax filing process
• Avoid processing delays due to the end-of-year rush
• Avoid paying state franchise taxes and compliance paperwork for the year registration forms were submitted
• Have ample time to sort out other requirements
• A delayed filing can be used for a new business or to change the entity of an existing business

When to Submit a Delayed Filing

Different states have different rules as to how far in advance they will receive a delayed filing or if they will accept it at all.

For Example, Below is a Sampling of State Requirements:

• Alabama – 90 days
• Arizona —90 days
• Arkansas —90 days
• California – 90 days
• Colorado —90 days
• Florida – 90 days
• New Jersey —90 days
• Pennsylvania – No limit
• Rhode Island – 90 days
• Texas – 90 days
• Delaware – 180 days for LLCs and 90 days for Corporations

States that DO NOT Allow Delayed Effective Filing Dates:

• Alaska
• Connecticut
• Hawaii
• Idaho
• Louisiana
• Maryland
• Minnesota
• Nevada
• Virginia

How to Request a Delayed Filing

Steps:

• Choose a business structure
• Decide on the effective data
• Submit the required paperwork identifying the delayed effective date

Points to Remember:

• As you register an LLC or Corporation, specify the number of days after the filing when you want the business structure to be effective
• Make sure Articles of Incorporation and/or Articles of Organization reflect the correct effective date
• If your state doesn’t have a designated provision within the formation paperwork, you can add in an additional provision

Considerations for Deciding the Best Time to Incorporate

Do you plan to open a business entity in the USA next year? If the answer is Yes, then this is the right time to start the process of Incorporation so that your entity can be formed and become live from January 01, 2023.

• Mid-year – If you incorporate mid-year, expect additional paperwork including tax forms and annual reports.
• End of Year Rush – Expect an “end of year rush” with many filing requests this time of year.
• Delayed Filing Option- Take advantage of a Delayed Filing 30 – 90 days in advance of your requested effective date in most states.
• Tax Benefits – Tax benefits for incorporating could be significant that it makes no sense to wait.
• Legal Protection – Legal protection of personal assets from any liability owned by the company may be needed sooner rather than later,

Annual Business Compliance of USA Checklist

Business Activity Performed this Year	Compliance Filing Required
Hired your first employee(s)	Register for payroll taxes
Started charging sales tax	Register for sales tax
Changed your business activity or purpose	File an Articles Of Amendment\
Changed your business name	File an Articles of Amendment Order a new Corporate or LLC Kit and Embosser
Assumed an alternate business name for an existing corporation or LLC	File a DBA (Fictitiou Business Names) Revise existing Trademarks
Changed your business address	File an Articles of Amendment
Moved the location of your business to a new state	Process a Redomestication Filing Revise your Registered Agent Services
Apply for a business loan	Submit a Certificate of Good Standing
Expanded your business into a new state(s)	File for Foreign Qualification
Expanded your business internationally	Request Apostille Certification
Changed the ownership of your business	Create a new LLC Operating Agreement File a  Articles of Amendment Order LLC Member Certificates
Changes your members or board of directors	File an Articles of Amendment Request Custom Bylaws and Minutes

 

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Legal Disclaimer:
The information / articles & any relies to the comments on this blog are provided purely for informational and educational purposes only & are purely based on my understanding / knowledge. They do noy constitute legal advice or legal opinions. The information / articles and any replies to the comments are intended but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as a legal advice or an indication of future results. Therefore, i can not take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog. You are advised not to act or rely on any information / articles contained without first seeking the advice of a practicing professional.