If you are a small business owner already or just starting out, you may be considering forming a limited liability company.  While there are many benefits there are also requirements that need to be met when it comes to LLC formation.  There are many advantages of forming an LLC, but you need to make sure you follow the right steps in order to receive those benefits.

If you have not yet started your business you have a clean slate in choosing your business name.  It is a good idea to perform a name availability search within the state you plan to incorporate in. For example, if you planned to incorporate in Nevada, you would need to perform a Nevada Secretary of State business search and determine if your name is available.

Once you’ve conducted a preliminary search, if the name you want to use for your business is already in use or too similar you will need to come up with a back-up name.  This could present a problem if you have already been operating your business under a certain name that is already incorporated in your state. 

Another requirement is stating your business purpose.  There are two types of business purpose clauses; general and specific.  Depending on which state you want to incorporate in some states accept a general-purpose clause.  Other states require more detailed description of what your limited liability company will provide. 

In order to form a limited liability company you will need a resident agent in your state of incorporation.  There are several requirements of a resident agent.  For example a resident agent must have a physical address and be available during normal business hours.  Laughlin Associates provides resident agent service for a very low annual cost. This is especially convenient if you are incorporated out of state. 

Setting up an LLC properly demands that you have a management structure.  Your LLC can be managed by owners or a manager.  It is important to outline in your Articles of Organization if your company will be operated by a member or a manager. 

Requirements to form an LLC vary from state to state.  It can get confusing and you may have questions along the way.  Laughlin Associates provides one-on-one service to our clients to ensure their companies are set up properly.  We are there every step of the way to provide personalized service.  We are available to answer questions and provide you will real answers.  We pride ourselves on providing quality customer service and maintaining a personal relationship with you to help you get the most out of running your small business. 

Have questions about forming an LLC? Call me at 1-800-648-0966 or drop me a line at mstein@laughlinusa.com.

If you get involved with an audit the burden of proof lies on you. While you might not be able to avoid an audit, you can make it less painful by following a few simple rules.

You should always keep accurate records showing travel, entertainment, meals, seminars, medical, auto and other business deductions you might take. They should be containing specific information like the date, amount, reason for the expense, and the names of people who might have accompanied you.

If you don’t think it’ll happen to you then think again. You are in the highest risk category for an audit if you are self-employed, or involved with a pass through entity such as a partnership, S-corporation or an LLC; especially if you are a corporation with a reported income of over $250,000.

Taking the time to keep accurate records from the start can save you a tremendous amount of time and hopefully money when and if you are involved in an audit.

 According to an article entitled, “Audit Proof Your Business-Maximize Your Deductions With Confidence,” posted at www.mygeorgiaaccountant.com, small business owners should keep a few things in mind when you’re preparing yourself for the IRS’ eagle eye.

“Self-employed business owners have one of the biggest targets on their backs from the IRS.  They are constantly under scrutiny for the deductions that are taken since there are many that attempt to take advantage of the system.  It is for this reason that it pays to take a few extra steps to minimize your chances of getting bitten if your return is selected for audit.”

The article continues on to say, “The main goal here is to keep adequate documentation so you can maximize your deductions with confidence.  Nobody is saying to break any laws, we just want to make sure that you get every deduction possible and the best way to do this is to make sure that you are ready for questioning before the tax return is filled out.  In the unlikely chance that you are selected for an audit, being prepared will make the process a quick and painless one.  The Internal Revenue Service is more concerned with the folks that cannot back up their deductions than the ones who can.”

Auto Expenses

• Mileage – keep a log if possible
• If no log, use your appointment calendar for proof of your meetings and therefore, your miles driven
• Can also use total fuel purchased during the year to calculate mileage
• Charge all fuel purchases to your business account

Advertising

• Keep invoices from advertisers as proof of your expenses
• Keep a copy of the ad placed or some samples of any promotional items purchased

Equipment/Assets

• Keep receipts, proof of purchase as your accountant will need these at year end when preparing your tax return
• Scan a copy of loan and lease agreements to your computer and email to yourself after deal is signed so you have a permanent electronic  copy

Meals

• Keep a good record of breakfast, lunch and dinner meetings
• Write who you met with and what business purposes you discussed on the back of your receipt

Subcontractors

• Don’t pay a dime until you have a W-9!
• No w-9/no 1099/-deduction can be disallowed or payments can be re-characterized as payroll and become subject to  back payroll taxes

Receipts not required  if less than $75

• Per IRS rules, you are not required to provide receipts as proof of any purchases that are less than $75

 Charge to business checking account

• When in doubt, charge any expenses that may be deductible to your business checking account-it is easier to reclassify any purchases as personal as opposed to going through your personal accounts and identifying any business expenses

Reconcile your books or pay someone to do them for you

• Unless you possess some formal accounting training, there may be some deductions and opportunities that are missed if you handle all of your own bookkeeping duties

If selected for audit, will need to usually supply:

• Bank Statements
• General Ledger
• Balance Sheet
• Income Statement
• Tax Returns
• Other Supporting Documents (Leases, Loans, Amortization Schedules, etc.)

Pay your taxes!!

• It sounds like a no-brainer, but one of the easiest ways to get on the IRS’s radar is to ignore your tax liabilities, once they discover that you are non-compliant, they have an open window to start digging further into your file

Neat stack vs. Box of Crap

• If you are selected for audit, showing up with a neat stack of papers that are already sorted and organized will make your audit process a less stressful one

As part of my duties for Laughlin Associates, I travel around the country speaking to business owners about the importance of corporate or LLC compliance. Once one of these companies is formed the owners have ongoing responsibilities to document the decisions that these companies make. I try to teach that to people.

But one person will ask the question that the entire room is interested in learning: How can I make my business more successful and make more money? They usually follow it up with discussions about websites, blogs, or marketing. It seems that the perception is the only way to be more successful in business is to get more clients. That is logical, more clients equals more money. I get it. However, your business could be more successful without gaining another new client. What I try to tell them is that there is wealth hidden in your business that you don’t realize.

A recent study conducted by the federal government estimates that the average business owner over pays their taxes. Not by a little, but by a whopping $11,600 per year. Think about that. What could you have done with an extra $11,600?  How many additional clients would you have had to get to “net” that extra income? So why do we over pay? It’s simple. We don’t know the rules.

Taxes are such an interesting topic to hear from business owners. They seem to fear it. People will tell me the tax code is too complicated to learn, or that their CPA takes care of the taxes for the business. The responses seem to indicate an implied waiver of the reasonability, or a genuine fear of the topic itself. But no matter what you do in your business, you will always be more successful with just a little bit of tax education.

Now if I suggested to you that you need to learn the entire tax code that would be intimidating. But a little knowledge goes a long way here. All business owners have basic deductions that are available to them. This is true regardless of your business structure. They are: Entertainment, Travel, Gifting, Home Office, and Vehicle. Many of us take these deductions now. However, when I ask people about these rules I hear a lot of different and conflicting stories. As a result, how could a business owner be confident in claiming a deduction if they didn’t know the rules? Further, how assertive could you be if you didn’t know the particulars of the rules? Therefore, what happens next is deductions don’t get claimed and overpayment of taxes is the end result. Boy that fear can be crippling!

So how do you stop this? You decide that you can learn it! The tax code is not as complicated as people think. This is especially true in regards to the deductions we discussed above. As part of our paper work program we offer clients the tools and education to learn these deductions and many more. So if you have an opportunity to get involved with our compliance service I would strongly recommend it because this is something that we offer those clients. Also I can suggest a couple of publications that might assist. Sandy Botkin, CPA puts out an excellent series of books and CD’s on business taxes that are great. And of course, you can also log onto the IRS website and download their publications.

I learned an expression some time ago that I think is quite fitting here. Someone once told me that the definition of fear is: indecision plus doubt equals fear. I like that. If you don’t know what the IRS is expecting from you that can create indecision. Claiming a deduction your not sure about is creating doubt, so you don’t claim it. So of course you have fear. But remember F.E.A.R. is nothing more than False Evidence Appearing Real.

It is not too complicated, and it is well worth the investment. Remember you can conquer anything you put your mind too. I know you can do it!

Scott Burnett is a highly acclaimed corporate trainer and Laughlin Associates’ Director of Education.  He will be speaking at these locations and at our July Seminar in Lake Tahoe.

The other day as I was having a conversation with my aunt who is a hair stylist, she was telling me how she pays to rent the space she uses to cut hair.  She also has to pay for her own supplies and pays a percentage of her services to the owner of the salon. She was a little surprised when I said, “Congratulations on running your own business.” She never made the connection between her work and being a business owner. She was so focused on the service that she never took the time to understand what being a business owner could mean to her.

In our business, we talk to many people in the same situation.  They don’t give themselves credit for running their own business. They work in a variety of professions; independent contractors, consultants, day care providers, technicians, multilevel marketers, or they might even work for someone else but also run a part-time business.  Well, if you have income coming from other sources beside W-2 income, you might be a business owner with all the benefits that come with it.

“You would be brain dead not to start your own business,”  says Sandy Botkin, CPA, Esq.

The IRS wants to give you credit for running your own business. As a business owner you get all sorts of tax deductible benefits from the government.  If you take it one step further and incorporate your business, then you really start to see some savings…no more self-employment tax, 100% tax deductible medical reimbursement plans, paid life insurance, not to mention the liability protection a corporation can provide you.

So go ahead…admit you’re a business owner. Now take the time and really understand what that means to you and the best way to structure your business to take the greatest advantage of being a business owner.

Forming Nevada Corporation – Timing is Everything

If you are considering forming Nevada Corporation, you need to understand the process of business incorporation on every level. You should take the time to figure out the rules and regulations required by Nevada state law, and ensure that you have what it takes to form an actual corporation that can be successful in the state of Nevada. Forming Nevada Corporation is not something that will be terribly easy, unless you are truly prepared and well educated on the subject of business incorporation. However, there are many professional resources out there for those who are less informed, to help you every step of the way.

One of the key things to her member when forming Nevada Corporation is that timing plays a big role in your success. If you incorporate at the wrong time, you might suffer in your business success. When you do incorporate at the right time, however, you will reap the rewards of your decision for many years to come. Many people don’t understand when it’s time to incorporate their business. If you’ve got your point where your business is very large, has a lot of assets to protect, and has employees that need to be taken care of, then you’re probably getting close to incorporation if you’re not already past the point that you should have done it.

Forming Nevada Corporation is not an easy task, but it is one that you can undertake with confidence when you take the time to educate yourself on the subject. After all, and the fear and uncertainty that you feel about incorporating your business will easily be quelled when you become more educated on the subject. Knowledge and understanding is the key to successful business incorporation, no matter how big or small company you are incorporating.

If you’re truly serious about forming Nevada Corporation, you need to take the time to learn about the process, paperwork, and everything that you need to do as a business owner to incorporate your business. You should also embrace any and all professional resources that are offered to you or that you come across so that you can have the best chances of success in your incorporation. Although there is not one strict and proven method that works for every business, there are certain rules and regulations need to be followed regardless of the path that you take in incorporation. By following these guidelines, you will be much more successful in the end.